What for a long time seemed like a close race in Washington, turns out to be less obvious than expected. Behind the scenes, doubts are growing about the appointment of the new chairman of the Federal Reserve (Fed), the US central bank, who will take office in May next year. Kevin Hassett, who many believe is a proponent of lower interest rates, may now have a much lower chance.
Trump camp divides over Kevin Hassett
For months, Kevin Hassett was considered the top favorite to succeed Jerome Powell as chairman of the US central bank. But according to CNBC, there is now growing opposition to his candidacy from sources close to Donald Trump. There are fears within Trump’s entourage that Hassett is too closely linked to the president, which could undermine the independence of the central bank.
The concerns have given the battle for the Fed chairmanship an unexpected twist. Kevin Warsh, a former Fed governor who was sidelined for a long time, suddenly has a serious chance of winning the top job again.
On the prediction platform Kalshi, Warsh now has a clear lead over Kevin Hassett: 52 percent compared to 42 percent at the time of writing. Striking, because at the beginning of December Hassett was still at more than 80 percent.
Last weekend, Hassett emphasized on CBS that “the Fed must operate independently” and that interest rate decisions are not made by the president, but by the Federal Open Market Committee (FOMC).
A new Fed chairman directly influences interest rate policy, and that is crucial for crypto. Hassett is seen as pro-Trump and in favor of interest rate cuts, which is good for risky assets. Warsh is considered more cautious and independent, and could be less inclined to cut rates.
This month, the Fed implemented its third interest rate cut of the year, to a range of 3.50 to 3.75 percent. Despite this reduction, American interest rates are still significantly higher than in the euro zone, where the rate is currently 2 percent.
Trump wants lower interest rates, at all costs
In a recent interview, the American president explicitly linked his preference for a new Fed chairman to one condition: immediate interest rate cuts. Trump sees lower interest rates as essential to boost economic growth and also to ease the financing burden of the enormous national debt.
Lower interest rates are also what investors would like to see. Borrowing then costs less, saving yields less and therefore more money is released to look for returns.
Although Trump recently stated that he already knows who he will choose, he shortly afterwards added fuel to the fire by saying that “the two Kevins are both great,” referring to Hassett and Warsh. That fuels speculation that he has not yet made his final decision.
Source: https://newsbit.nl/warsh-vs-hassett-wie-wordt-de-volgende-baas-van-de-federal-reserve/
