Bessent To Formally Begin Interviewing Candidates To Replace Powell This Week: What Happens Next?

With the relationship between Federal Reserve Chair Jerome Powell and President Donald Trump not getting any better, the search for his replacement kicks off in earnest this week. 

A Wall Street Journal report, citing people familiar with the matter, said Treasury Secretary Scott Bessent will begin interviewing candidates on Friday to fill in Powell's shoes when he steps down as central bank chief in May.

A series of interviews has been scheduled, spilling over into the following week. 

The reported schedule aligned with Bessent's suggestion earlier that the selection process would begin after Labor Day.

According to the Journal, about 11 candidates are being considered for the highly influential post. These include Federal Reserve Board (FRB) Governors Christopher Waller and Michelle Bowman.

Waller and Bowman are in the dovish camp, as they dissented and called for a 25-basis-point cut at the July rate-setting meeting. In his subsequent speeches, Waller has reiterated his call for an immediate rate cut, although he has said the magnitude of cuts will depend on the incoming data.

The other candidates, according to the report, are National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh. 

Following the interviews, Bessent would recommend a final list of the candidates to Trump for the president's scrutiny.

Trump has been at odds with Powell over the latter's stance on interest rates. Powell has deemed it prudent to err on the side of caution and maintain steady interest rates until inflation returns to the central bank's target and the full impact of the Trump tariffs is understood.

On the other hand, Trump has continued to attack the official, calling him“Too Late Powell” in his social media posts, for not taking down interest rates despite inflation continuing to cool, the economic growth remaining resilient, and the stock market trading at a record.

The president sees the need for a drastic reduction in the Fed funds rate to below 1%. 

Trump and his administration have also counterattacked Powell, calling him out for alleged mispropriety in the renovation of two buildings of the Fed headquarters, with the president even going for a personal inspection. 

The stock market has weathered the standoff between Trump and Powell and pushed to record highs in August before giving back some gains.

The SPDR S & P 500 ETF (SPY), an exchange-traded fund (ETF) that tracks the S & P 500 Index, and the Invesco QQQ Trust (QQQ) have added 9.90% and 10.93%, respectively, this year.

While sentiment toward the SPY ETF remained 'bullish' (/100) by late Tuesday, that toward the QQQ ETF stayed 'bearish' (30/100). The message volume on the SPY stream improved to 'neutral' levels, and that on the QQQ stream rose to 'high' levels.

A Politico report stated in mid-August that the criteria used for screening the candidates are that they should be able to win Trump's trust as well as that of the market.

Citing anonymous sources, the report stated that Fed Vice Chair  Philip Jefferson, Dallas Fed President Lorie Logan, former St. Louis Fed President James Bullard, and macro consultant Marc Sumerlin are also being considered. These are in addition to the names flagged by the recent Wall Street Journal report. 

Jefferson is a Biden-nominated board member, although he has maintained a bipartisan stance and a low-key public presence, according to the report.

In his appearance on CNBC in mid-August, Bullard said that Trump's tariffs have not flared up inflationary pressure. He expects the central bank to cut rates at the September meeting en route to trimming them by a full percentage point over the next year. This would take rates close to 'neutral," he said.

The Fed Chair should be nominated by the president, and receive confirmation by the Senate. They are appointed for a four-year term. The nominee has to be a member of the Fed's board. Currently, the seven-member board has a seat vacant following Adriana Kugler's resignation in August after she had absented herself from the July policy meeting. 

Trump has nominated Chairman of the Council of Economic Advisors Stephen Miran for the vacant post to serve until Jan. 31, 2026. 

Incidentally, a Fed chair can serve multiple terms if they are renominated and confirmed by the Senate. 

The president is also on a witch hunt against Lisa Cook, another member of the board, on alleged charges of mortgage fraud, ordering her resignation. Cook has filed a lawsuit against dismissal by the president. 

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