According to informed sources, Kevin Hassett's candidacy for Federal Reserve Chair was once seen as a foregone conclusion, but now faces resistance from some senior figures who can speak to President Trump.
Insiders say there are concerns that the National Economic Council Director is too close to the president, ironically, this is precisely why he initially became the frontrunner to succeed current Chair Powell. This resistance may explain why candidate interviews were canceled in early December and then rescheduled for last week.
Trump told reporters he had a candidate, but in an interview with The Wall Street Journal last Friday, he stated that former Federal Reserve Governor Kevin Walsh has now tied with Hassett at the top of the Federal Reserve candidate list, which surprised investors greatly. This statement caused Hassett's odds in the prediction market to plummet.
Trump said at the time, "I think both Kevins are great."
On Monday, Hassett remained a popular candidate in the prediction market, with a winning probability of 51%, although this figure has fallen from over 80% earlier this month. Walsh's winning probability is currently at 44%, an increase from about 11% in early December.
This resistance manifests more as support for Walsh rather than criticism of Hassett. At a JPMorgan event last Thursday, the bank's CEO Dimon gave positive evaluations of both Hassett and Walsh, but some of his comments led the audience to believe that Dimon favored Walsh, the former Federal Reserve governor.
Foreign media reported at the end of November that Hassett has become a leading candidate to succeed Powell, whose term ends in May.
However, according to multiple sources, as December progresses, Hassett's campaign has faced some resistance. There are growing concerns that if the bond market perceives him as too subservient to Trump, it may rebel in the future. This view could ultimately produce the opposite effect of what Trump expects: due to worries that Hassett may not take sufficient measures to curb inflation during a future rebound, long-term yields may eventually rise.
Perhaps in response to some criticism, Hassett appeared more resolute on the issue of Federal Reserve independence during a CBS News interview over the weekend.
According to the transcript, Hassett stated on the program that Trump "has very strong and well-reasoned views on what we should do. But ultimately, the Federal Reserve's responsibility is to maintain independence and work with board members and colleagues from the Federal Open Market Committee (FOMC) to reach a collective consensus on the direction of interest rates."
When asked whether Trump's views would carry the same weight as those of voting members, Hassett said, "No, no, he doesn't carry weight. If his opinion is good, you know, if it's data-based, then his opinion matters."