President Donald Trump’s narrowing of the shortlist for the next Federal Reserve Chair has significantly improved the prospects of Kevin Warsh, a former Federal Reserve governor.
In recent days, Trump has publicly indicated that he is considering just two finalists — Kevin Warsh and Kevin Hassett, his current director of the National Economic Council — and described them as “the two Kevins”. The president stressed that he wants a Fed leader who will be willing to lower interest rates and consult with the White House on monetary policy. These remarks would mark a notable shift from the Fed’s traditional independence.
As U.S. President Donald Trump named his top two candidates to replace Jerome Powell, markets reacted fast. Betting platforms and cryptographically linked prediction markets are showing massive support for Warsh. Traders now regard him as a credible alternative to White House economic adviser Kevin Hassett.
In any case, Trump will likely announce his nomination long before Powell’s term ends in May 2026.
Traders push Warsh’s odds as Trump narrows Fed choices
Within days, Warsh’s odds of becoming the next Fed chair soared from roughly 12% to above 38%. The move followed reports that Trump has trimmed his list to two finalists. Kevin Hassett remains the favorite to win. But his lead has weakened.
Now, after Trump went public with his praise, traders recognize an actual path ahead for Warsh. Shareholders consider the Fed chair race as key. Trump has been vocal about slashing interest rates. He said that the United States should have the lowest rates of any major economy. That position matters to markets.
Most traders expect the next Fed chair to advocate for quicker and more aggressive rate cuts than the existing stance. Warsh is viewed as open to that transition. His previous criticism of persistently high rates resurfaces in current debates.
That has helped bolster market confidence that he’s more in line with Trump’s economic priorities. Trump himself has said that Warsh is among his biggest choices. He has also confirmed that he interviewed several candidates in recent days.
Warsh is reported to have been robust in those discussions. Other candidates continue to be considered. They are Fed Governors Chris Waller and Michelle Bowman, as well as Rick Rieder of BlackRock.
However, attention has shifted increasingly to Warsh and Hassett. Wall Street backing has also helped fuel Warsh’s momentum. Jamie Dimon, JPMorgan Chase’s chief executive, has signaled support for Warsh as a credible and steady option. That backing has reverberations across financial markets.
Critics, on the other hand, have expressed concern. Some lawmakers fear that Trump’s selections might erode the Fed’s independence. They say pressure to cut rates quickly could aggravate inflation risks. Trump brushed those fears aside. He has made lower rates a litmus test for his next Fed chair.
Markets bet on aggressive Fed rate cuts
The Fed now fears small rate cuts by 2026. However, traders believe Trump will quickly move to cut rates further when he appoints a proponent of rate cuts. Most market indicators currently suggest that a few rate cuts will occur next year.
Some have three cuts in mind, a far cry from the Fed’s median view. Chicago Fed President Austan Goolsbee recently stated that the committee could cut more than the current forecast if inflation continues to cool. His comments worked to reinforce market perceptions.
Depending on whom the president picks to replace Powell as Fed chair, it could be a decisive factor. A Warsh nomination may also mark a more rapid pivot to looser monetary policy.
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