Trump criticizes Powell again, says rate cuts are needed! Fed Chair to be replaced in early 2026, Hassett is a leading candidate

US President Trump stated at a cabinet meeting that he may announce his pick for Federal Reserve Chair in early 2026, and mentioned that Treasury Secretary Besant does not want the position. Trump said he has already evaluated 10 candidates, with only one finalist remaining. Later, at a White House meeting, Trump introduced Hassett and remarked that the potential Fed Chair is right here. In addition, Trump reiterated his criticism of Powell, stating that even JPMorgan CEO Dimon said Powell should lower rates.

Trump Publicly Hints at Hassett Succeeding Powell

The December 3 cabinet meeting marked a turning point in the public rift between Trump and Powell. Trump clearly stated that he might announce his choice for Fed Chair early next year, coinciding with the end of Powell’s term. Even more notably, when introducing White House economic adviser Kevin Hassett, Trump directly stated, “the potential Fed Chair is right here.” Such a public hint is extremely rare in US political history and signals Trump’s determination to replace Powell.

Hassett emerging as the main contender to succeed Powell is no accident. The White House economic adviser has repeatedly expressed support for more aggressive rate cuts, aligning closely with President Trump’s goal of lowering rates. In recent months, Hassett has frequently criticized the Fed’s monetary policy as too conservative and argued for more aggressive rate cuts to stimulate economic growth. This policy stance contrasts sharply with Powell’s cautious approach.

Trump also added that Treasury Secretary Besant does not want to take the Fed Chair position, ruling out another potential candidate. Trump said he has already evaluated 10 candidates, with only one finalist left. This indicates the decision process is nearing its end, and Hassett is clearly the most likely choice. If Hassett does take over, the Fed’s monetary policy stance could see significant changes.

Policy Differences Between Hassett and Powell

Rate Cuts: Hassett supports more aggressive rate cuts, Powell prefers gradual adjustments

Inflation Tolerance: Hassett focuses more on economic growth, Powell prioritizes controlling inflation

Political Independence: Powell emphasizes Fed independence, Hassett is more aligned with the White House

Policy Communication: Hassett advocates clearer forward guidance, Powell prefers to remain flexible

Historically, the appointment of a Fed Chair has profound effects on financial markets. If Trump does announce Hassett as the new Chair early next year, markets are likely to adjust significantly. A pro-rate cut stance could boost stocks and cryptocurrencies, but may also reignite concerns over rising inflation.

Trump Teams Up with Dimon to Criticize Powell on Rate Cuts

At the cabinet meeting, Trump reiterated his criticism of Powell, stating that even JPMorgan CEO Dimon said Powell should lower rates. Leveraging the words of a Wall Street titan to criticize the Fed Chair shows Trump is seeking broader support for his position. JPMorgan CEO Jamie Dimon is one of the most influential figures in US finance, and his views often represent mainstream Wall Street sentiment.

Dimon has indeed recently expressed concerns about the Fed’s monetary policy being too conservative. He has pointed out on several occasions that current economic data show manufacturing weakness and order declines, and that the Fed should be more aggressive in cutting rates to support the economy. This view is highly consistent with Trump’s position and gives Trump financial sector backing in criticizing Powell.

Monday’s ISM Manufacturing PMI data provided empirical support for rate cut arguments. The US ISM Manufacturing PMI in November was 48.2, dropping to a four-month low and below the expected 48.6. The data show manufacturing has contracted for the ninth consecutive month, with declining orders and rising prices due to tariffs. These signs of economic weakness have led markets to widely expect a Fed rate cut on December 10.

CME FedWatch Tool shows the probability of a 25 basis point rate cut fluctuating around 87%. This high probability reflects the market’s strong expectation of a Fed rate cut. However, Powell refused to comment on monetary policy in his speech at Stanford University, a silence interpreted as a tacit protest against Trump’s criticism.

In his opening remarks at a Stanford event honoring the late economist and statesman George Shultz, Powell stated clearly: “For clarity, I will not comment on current economic conditions or monetary policy.” This was to be expected, as the Fed Chair has not commented on monetary policy since stating at the October press conference that a December rate cut was uncertain. The blackout period before next week’s FOMC meeting prevents Powell from commenting on monetary policy in his speech.

Fed Independence vs. Political Pressure

The conflict between Trump and Powell highlights the fundamental tension between Fed independence and political pressure. The independence of the Fed is a cornerstone of the US monetary policy framework, designed to shield central bank decisions from short-term political considerations. However, Trump’s public criticism of Powell and hints at replacing him challenge this independence.

Legally, Trump does have the right to appoint the Fed Chair, but only when the incumbent’s term expires or if they voluntarily resign. Powell’s term ends in May 2026, meaning Trump’s statements about announcing a new Chair early next year may be aimed at pressuring Powell to resign early, or simply announcing a succession plan in advance. Either way, this public pressure challenges the Fed’s independence.

Market reactions to such political intervention are complex. On one hand, more accommodative monetary policy is short-term positive for stocks and cryptocurrencies; Bitcoin rebounded above $91,000 after Trump’s comments and is now trading at $86,970. On the other hand, if Fed independence is undermined, it could damage long-term confidence in the dollar and the US financial system.

Notably, Powell’s speech coincided with the end of Quantitative Tightening (QT). Any comments could affect the liquidity provided by planned Quantitative Easing (QE) to the financial system. Silence at such a sensitive time is both compliance with blackout rules and possibly a silent resistance to political pressure.

December Rate Cut Expectations and Market Reactions

Expectations for a December 10 rate cut are extremely high. An 87% probability indicates investors are almost certain the Fed will cut rates by 25 basis points. This would be the Fed’s third rate cut this year, continuing the easing cycle since late last year. Joe Saluzzi, head of equity market structure research, told Reuters: “I don’t see why the uptrend won’t continue, at least not that quickly, and it could last through the end of the year.”

Bitcoin’s price volatility reflects the market’s sensitivity to monetary policy. On December 3, Bitcoin rebounded above $91,000, with a 24-hour low and high of $83,862 and $87,325, respectively. Over the past 24 hours, traders generally maintained a buy-the-dip sentiment, with trading volumes remaining high. According to CoinGlass data, total BTC futures open interest jumped 0.25% to $57.7 billion.

If Hassett does take over as Fed Chair, markets expect a more aggressive rate cut path. This would be hugely positive for the crypto market, as looser monetary policy typically drives investors into higher-yielding risk assets. However, this could also spark inflation concerns, and if inflation resurges, the Fed may be forced to tighten policy again.