Market Rumors Cause Concern, White House Clarifies
As news spread widely about Trump potentially appointing a new Federal Reserve Chairman ahead of time, the market began to worry that this might undermine the Fed's policy independence. In response, White House officials on Thursday denied claims of "accelerating the replacement of the chairman."
"All decisions about replacing the Federal Reserve Chairman are not imminent, but the President certainly has the right to change his mind at any time," the White House official stated, adding that "Trump has many excellent candidates to consider."
The current chairman, Powell, is set to end his term in May 2026, and the early announcement of a successor is widely seen as creating a "shadow chairman." A "shadow chairman" refers to a candidate who can intervene in policy expectations ahead of taking office, guiding market trends, which could pose a challenge to the Fed's credibility.
Market Reaction: Dollar Declines, Bond Market Strengthens
In response to the statement, the market reacted immediately. The dollar index weakened during the session, bond yields fell, and investors reassessed the risk of Fed policy being influenced by politics.
The Federal Reserve is currently at a critical point of deciding whether to cut interest rates. Recently, Chairman Powell testified before Congress, stating that the U.S. economy's resilience remains strong, and the interest rate level does not need immediate adjustment, though he also emphasized monitoring the potential impact of tariffs on prices.
Conversely, Trump has criticized Powell for weeks for being "slow to act" and "performing poorly," publicly stating he will "soon" make a decision on the position. It is reported that Trump has narrowed down the list of candidates to three or four people and remarked during the NATO summit that "Powell will soon be leaving, fortunately."
Candidate List Emerges, Several Close Associates Named
Although the White House has not released an official list, there are already several popular candidates circulating in the market. According to informed sources, former Federal Reserve Governor and current Hoover Institution scholar Kevin Warsh is one of the most favored candidates. He has a good personal relationship with Trump and once advised the President not to fire Powell, demonstrating high political sensitivity.
Other potential candidates include current Federal Reserve Governor with a dovish stance, Waller, Treasury Secretary Besant, and White House National Economic Council Director Hassett. Many of these individuals have an open attitude toward faster rate cuts, aligning closely with Trump's position to "stimulate the economy through interest rate cuts."
Fed Officials Attempt to Stabilize Market Confidence
In response to external concerns about the Fed's policy direction, Chicago Fed President Goolsbee stated in an interview on Thursday: "The new appointee will not affect current monetary policy decision-making authority." He emphasized that even with the announcement of a successor, the current chairman remains the Congress-confirmed Jerome Powell, and the institutional design within the Fed ensures that policy decisions are not easily influenced by external factors.
He added, "FOMC elects a chairman every January, and currently it is Powell. At this stage, how can someone who is not yet chairman view monetary policy? There are already enough opinions in the market."
Despite the White House clarifying that "no replacement decision has yet been made," the market has apparently raised doubts about the Fed's independence. Amid increasingly publicized tensions between Trump and Powell, the neutrality and future trajectory of monetary policy will continue to be a focus for investors. Subsequent announcements regarding candidate disclosure and internal Fed responses will be key variables in the market's next phase of development.
