The market's reaction to Hassett potentially becoming the Chairman of the Federal Reserve has been much calmer than expected. The Polymarket prediction platform shows that his nomination probability has exceeded 77%, but the interest rate market has not experienced significant fluctuations. There may be a few reasons behind this calmness.
From his background, Hassett comes from a traditional economics background—Ph.D. from Wharton School, professor at Columbia University, and has served as a senior economist at the Federal Reserve. This background is closer to the traditional central bank technocrat path than Powell's, and at least on paper, he meets the market's professional expectations for the leader of the Federal Reserve.
More importantly, there are his policy inclinations. Although he is a supporter of the Trump economic agenda, his recent statements emphasize a slow and steady observation of data, rather than being the extreme radical that outsiders fear. In contrast, another nominee, Milan, while advocating for interest rate cuts, also acknowledges that the neutral interest rate is around 2.5%, which is not far from current expectations. The market may judge that even if Hassett takes office, he is more likely to adopt a compromise approach rather than a drastic shift.
A deeper reason is that the market's understanding of 'the independence of the Federal Reserve' is changing. Historical experience shows that central banks find it difficult to completely detach from political influence, and investors are fundamentally more concerned about the actual path of policy easing rather than the theoretical purity of institutional independence. In the future, the market may gradually adapt to the new narrative that 'fiscal and monetary policy need to be more closely coordinated.'
Ultimately, the market is pragmatic. As long as the policy direction is predictable and does not deviate significantly, who sits in the chairman position may not be as important as imagined…