Kevin Warsh Becomes Favorite for Fed Chair as Trump Says He Has Decided on Powell’s Successor

Kevin Warsh has become a market favorite in being the next Federal Reserve Chair. This is after President Donald Trump confirmed that he has already settled on the successor of Jerome Powell but he will not name him yet.

Why Is Kevin Warsh Favored for Fed Chair?

Polymarket prediction markets now show Kevin Warsh as the leading candidate to become the next Federal Reserve Chair. Market data shows Warsh clearly ahead of other names.

Kevin Hassett is close behind him with Christopher Waller and Rick Rieder far behind him.  Following reports that Trump interviewed Rick Rieder for Fed chair position, the process of shortlisting gave him additional publicity.

The move also indicates investors are hoping for policy changes by the Federal Reserve. Markets are responding to possibilities in the political direction as opposed to an actual nomination.

Warsh used to be an ex-Federal Reserve governor, having vast policy experience. In addition, he narrowly missed the position during the first term of Trump.

His policy opinions usually indicate that he favors low interest rates. This relates to the easy financial situation that the market anticipates.

Are Markets Confirming Trump’s Fed Chair Decision? 

The same dynamics were observed previously where crypto traders bet on Fed chair picks. Prediction markets tend to anticipate announcements and odds of former Trump advisor Judy Shelton for this position also increased recently.

Traders are of the opinion that Warsh will most likely suit the direction Trump likes to take regarding interest rates. The widening margin indicates that investors consider his nomination as a growing possibility, prior to its confirmation.

The focus of an interview given by President Donald Trump was also on this issue. Trump was quoted in The New York Times saying that he has already formed an opinion of who will replace Powell.

However, Trump refused telling the name of his pick. He declared that he has not talked about the decision in the open. Trump, when interviewed about Kevin Hassett, replied that he will not comment.

Trump Prefers A Rate Oriented Fed Leadership 

According to the interview, the U.S. President admitted that Hassett is definitely one of the individuals that he likes. Still, the uncertainty regarding this position was seen in market reaction with the Fed chair race odds tightening following changes in the probabilities of Hassett becoming the head of the apex bank.

The comments Trump made have followed constant criticism on the leadership of Powell. The tenure of Powell as Fed Chair will expire in May, and Trump has favored reduced cost of borrowing as he believes the present policy on rates is too low to promote economic growth.

He has also mentioned that support for lower rates is one of the main qualification requirements of the position. Trump implied that other candidates who do not agree would not be selected.

However, such remarks have cast doubt on the independence of the Federal Reserve. The bank is supposed to be a non-political central bank.

The future Fed Chair will have to deal with a delicate economic situation. There are critical concerns on inflation, employment and financial stability.