Trump Says He Has His Fed Chair Pick: How a Politicised Central Bank Could Redraw the Market Map

In a few lines tossed out to reporters in the Oval Office, President Donald Trump managed to touch the single most sensitive nerve in global macro: who runs the Federal Reserve, and under what rules.

Speaking on 18 November during a bilateral meeting with Saudi Crown Prince Mohammed bin Salman, Trump confirmed that his administration has begun interviewing candidates to replace Federal Reserve Chair Jerome Powell when his term expires in May 2026. He went further, saying he “thinks he already knows” whom he will pick and repeating that he would like to remove Powell immediately, but is being constrained by advisers and legal concerns.

On its face, this is another chapter in a long-running feud between a president who wants lower rates and a central banker defending institutional independence. In practice, it is much more than that. It is an early signal that, in Trump’s second term, monetary policy and White House politics may become more tightly intertwined than at any point in the modern Fed era.

For investors, the question is not simply who gets the job. It is what a Trump-aligned Fed chair would mean for the inflation target, the reaction function and the risk premium embedded in everything from Treasuries to tech stocks to Bitcoin.

1. What Trump actually said – and what it confirms

The key facts from the Oval Office remarks are relatively straightforward:

• The administration has started formal interviews for the next Fed chair as Powell’s four-year term approaches its May 2026 expiry.
• Trump said he “thinks [he] already knows [his] choice” but declined to name the candidate, signalling that a de facto decision may be in place even before the shortlist is made public.
• He reiterated that he would like to fire Powell immediately for keeping rates too high for too long, but acknowledged that “people” around him have warned of legal and market fallout from attempting to remove a sitting Fed chair mid-term.
• Treasury Secretary Scott Bessent, who is overseeing the process, has already described a shortlist that includes traditional technocrats from within the Fed system and more overtly political figures with close ties to the White House.

Markets had known for months that Powell’s job was not secure under a second Trump presidency. The president has spent much of 2025 criticising the Fed for what he calls “interest rate stupidity,” arguing that aggressive tariffs and fiscal expansion require much looser policy than Powell has been willing to deliver. He has floated the idea of “restructuring” the Fed, attacked individual governors and even attempted to remove at least one board member from office.

What is new in the 18 November remarks is not the desire to replace Powell — that was widely expected — but the sense of urgency and pre-commitment. By telling markets that he has effectively chosen a successor while interviews are barely underway, Trump is signalling that this is not a beauty contest. It is a search for someone who fits a pre-defined political and macroeconomic vision.

2. Trump versus Powell: a conflict years in the making

To understand why this moment matters, it helps to see it as the culmination of a multi-year narrative rather than a sudden outburst.

Jerome Powell was first appointed chair in 2018 and reappointed in 2022 under the previous administration. He has since guided US monetary policy through the tail end of the pandemic shock, an inflation spike not seen since the 1980s and one of the steepest rate-hiking cycles in modern history. The Fed raised its benchmark rate from near zero to above 5% between 2022 and 2024, before cautiously beginning to cut again as inflation cooled.

Trump has positioned himself as Powell’s chief political antagonist. During his first term he complained that Powell was not cutting fast enough; in his second, he has framed the Fed chair as both the architect and the villain of the inflation episode. His critique blends several claims: that the Fed kept policy too loose under his predecessor, moved too slowly to tighten, and then over-corrected with excessive hikes just as tariffs and regulatory changes were weighing on growth.

Beyond rhetoric, Trump has taken concrete steps that many economists see as direct challenges to Fed independence. He has publicly explored firing or demoting Powell, sought to oust Governor Lisa Cook, and installed Stephen Miran — a close economic adviser — to a seat on the Board of Governors in an unusually overt move to put a political loyalist inside the FOMC deliberation room. The search for a new chair must be seen against that backdrop.

3. Can Trump actually fire Powell now?

Trump’s statement that he wants to replace Powell “right away” collides with the legal architecture that was deliberately designed to buffer the Fed from exactly this kind of pressure.

Under the Federal Reserve Act, board members, including the chair, are appointed for fixed terms and can only be removed “for cause.” Historically, that clause has been interpreted to mean serious misconduct or incapacity, not simple policy disagreement. No president in the modern era has successfully fired a Fed chair for policy reasons.

Legal scholars are divided on whether a court would uphold an attempt to dismiss Powell mid-term. Some argue that Supreme Court precedents limiting the president’s ability to remove certain independent regulators would protect the chair. Others note that the Fed’s unique structure and Trump’s appointment powers might give the White House more leverage than is commonly assumed.

For now, Trump’s advisers appear to be steering him away from a direct confrontation. The safer path, politically and legally, is to allow Powell’s chair term to expire in May 2026 while installing allies around him — including the designated successor as a governor — and gradually shifting the FOMC’s centre of gravity. That is the scenario markets currently price as the baseline.

However, Trump’s language keeps the option of more radical action on the table. Even an unsuccessful attempt to remove or sideline Powell before May 2026 would be a shock to institutional norms and could force investors to reprice the “independence premium” they implicitly assign to US assets.

4. What kind of Fed chair does Trump want?

Trump’s ideal candidate is not hard to sketch in broad strokes. He has repeatedly said he wants a chair who will:

• Cut interest rates “faster and further,” prioritising growth and employment over pre-emptive inflation control.
• Be more tolerant of inflation running above 2% for stretches of time, particularly if driven by tariffs and supply-side shocks.
• Coordinate more closely with the White House on macro strategy, aligning monetary settings with fiscal expansion, industrial policy and trade measures.

Within that framework, observers see two families of candidates emerging from the shortlist:

• Loyalist macro advisers — figures such as National Economic Council head Kevin Hassett, who have long-standing personal and ideological alignment with Trump, have defended his tariff strategy and have signalled a willingness to rethink core elements of the Fed’s doctrine.
• System insiders with dovish leanings — existing Fed governors or markets professionals who understand the plumbing of the system, command respect on Wall Street, but are perceived as more willing to err on the side of growth and looser financial conditions.

The president’s own comments capture this trade-off. He has teased that the shortlist includes both “standard names” and “surprising names,” implying an internal debate between appointing a relatively conventional central banker and choosing a more disruptive outsider who will symbolise a break with the Powell era.

A key determinant will be how Trump weighs market reassurance against policy control. A conventional pick could calm bond markets, keep borrowing costs lower and preserve the dollar’s safe-haven status. A more openly political pick might deliver quicker rate cuts and tighter alignment with the White House agenda, but at the price of a higher risk premium.

5. Inflation target, strategy review and the “restructuring” question

Beyond personalities, Trump allies have increasingly hinted at a deeper project: revisiting the Fed’s framework itself. That includes the sacred 2% inflation target and the degree of independence the central bank enjoys in setting its goals and tools.

The timing is delicate. In August 2025, the Fed completed its own scheduled review of monetary policy strategy and communications, reaffirming the 2% target while fine-tuning how it describes the trade-off between employment and price stability. Any attempt by a new administration to reopen that process from the outside would be a direct signal that the White House wants not just a different pilot, but a different flight plan.

What might “restructuring” mean in practice?

• Raising or widening the inflation target. Some Trump-aligned economists argue that a 3% target better reflects post-pandemic structural shifts, and that clinging to 2% forces the Fed to keep policy too tight. Moving the target, however, risks unmooring expectations and could lead investors to demand higher long-term yields.
• Formalising coordination. There is talk in policy circles about creating mechanisms that would more explicitly align Fed decisions with White House priorities, for example through joint policy statements or regular strategic reviews. That would blur the line between independent technocracy and political steering.
• Governance tweaks. Proposals range from increasing the influence of the Treasury in FOMC deliberations to changing the composition of regional Fed bank boards. Individually these might look technical; collectively they could give the executive branch more leverage over the institution.

None of these ideas has yet crystallised into formal legislation or executive action. But the fact that they are being entertained in public by figures close to Trump is itself a signal. Markets do not wait for statutes to pass; they react to perceived probabilities. A future chair perceived as sympathetic to such reforms will be priced very differently from one seen as a defender of the pre-2025 status quo.

6. Market implications: beyond the first headlines

So far, asset-price reactions to Trump’s November remarks have been contained: a small steepening in the Treasury curve, modest dollar volatility and some choppiness in risk assets that were already under pressure from other macro factors. That should not be mistaken for indifference.

The real impact of a politicised Fed succession plays out over three horizons:

6.1. Short term: uncertainty premium

In the near term, the main effect is uncertainty. Investors know Powell’s basic reaction function; they do not yet know his successor’s. Every data release between now and the announcement will be filtered through two lenses: what it means for the current FOMC, and what it might imply about the type of candidate Trump ultimately prefers.

This tends to show up as:

• Higher implied volatility around FOMC meetings and major data prints.
• Sensitivity of rate markets to political headlines, not just economic numbers.
• Greater caution from long-horizon investors who would rather wait for clarity on the Fed’s future leadership before making large duration or credit bets.

6.2. Medium term: re-pricing the Fed put

Under Powell, the Fed gradually rebuilt market confidence that it would act to contain inflation even at the cost of market discomfort. If Trump installs a chair seen as willing to tolerate higher inflation or to subordinate price stability to short-term growth, investors may begin to reprice the “Fed put”.

That could manifest as:

• A higher term premium on long-dated Treasuries, reflecting compensation for inflation and policy risk.
• Wider credit spreads, particularly for lower-rated corporates that benefit most from cheap money.
• Rotation from duration-sensitive growth stocks into sectors that historically perform better in steeper curve environments, such as financials and some commodities.

6.3. Long term: credibility and the dollar’s role

The longest-term risk is erosion of Fed credibility. If markets come to believe that US monetary policy is consistently bent toward political objectives, the consequences extend beyond a few basis points on yields. Confidence in the dollar as the world’s anchor currency rests partly on the perception that the Fed will prioritise macro stability over partisan goals.

That does not mean an immediate collapse in dollar dominance. But it could accelerate trends that are already underway: incremental diversification by foreign central banks, more experimentation with alternative settlement systems and a gradual increase in the premium investors demand to hold US assets through volatile periods.

7. Where does crypto fit in?

Although Trump’s comments were not about digital assets, crypto markets are already reacting to any signal that the macro regime could shift. A more politically influenced Fed that cuts rates faster and tolerates higher inflation is, in theory, supportive of the long-term narrative for scarce digital assets like Bitcoin. In practice, the path is messier.

In the short run, uncertainty about the Fed tends to produce higher cross-asset volatility. When global macro funds de-risk on the back of policy confusion, they often sell liquid holdings first, including BTC, ETH and large-cap altcoins, before rebuilding positions once the new regime is clearer. That dynamic can overshadow the slower-burn narrative of “Fed interference is good for non-sovereign money.”

Over a multi-year horizon, however, a structurally more dovish, politically sensitive Fed might reinforce the appeal of assets that sit outside the traditional monetary system. The nuance for professional crypto investors is timing and sizing: there can be a long and painful gap between the erosion of central bank credibility and the point where alternative stores of value sustainably benefit.

8. What to watch next

Trump’s declaration that he has effectively chosen the next Fed chair is the starting gun, not the finish line. Serious observers should track four things over the coming months:

• The official shortlist. Which names does the White House finally confirm as candidates? How are they positioned on inflation, independence and coordination with fiscal policy?
• Rhetoric on the inflation target. Do Trump or his advisers begin to talk explicitly about revising or “modernising” the 2% goal? Does the prospective chair endorse any such shift in public remarks?
• Congressional reaction. Key Senate voices from both parties will matter. Their early statements can signal how bruising the confirmation fight might become and what constraints they intend to place on the next chair.
• Behaviour of the current Fed. Powell and the FOMC are unlikely to change policy purely in response to political noise, but they may adjust their communications to defend independence and lock in elements of the framework before leadership changes.

The path from here is not binary. The US could end up with a relatively traditional central banker who happens to be Trump’s choice, and markets might breathe a sigh of relief. Or it could get a chair whose primary mandate, in the president’s eyes, is to cut rates and support growth regardless of the inflationary consequences. The difference between those two worlds is not academic; it is the difference between one volatility regime for the next decade and another.

Conclusion: an appointment that is really about the rules of the game

Trump’s claim that he has already chosen Powell’s successor makes for compelling headlines, but the deeper story is about institutions, not individuals. The Fed chair is not just another cabinet post. It is the hinge on which the world’s most important interest rate, and by extension the pricing of virtually all financial assets, turns.

If the next chair is seen as a guardian of the Fed’s dual mandate and its independence, the rules of the game for investors will look broadly familiar, even if the parameters shift. If the next chair is seen as an extension of the White House, tasked with delivering politically convenient rates and inflation, the rules change. Risk premia rise, correlations shift, and the global system edges into uncharted territory.

That is why this succession matters so much, and why serious analysis must look beyond tweets and soundbites. The choice Trump says he has already made is not simply about who sits in a high-backed chair in Washington. It is about whether the institution behind that chair remains recognisable in five years’ time.

This article is for informational and educational purposes only and does not constitute investment, trading, legal or tax advice. Monetary policy and political developments are uncertain and subject to change. Always conduct your own research and consider consulting a qualified professional before making financial decisions.