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As President Donald Trump prepares to nominate the next Federal Reserve chair, economists and former Fed officials say they’re worried that loyalty to the president will be a key factor in the upcoming decision. 

The White House pushed back, saying Trump is committed to nominating “the best and most qualified individuals” to key public institutions, including the central bank. 

“It is the Federal Reserve’s self-stated objective to set monetary policy based on the data,” White House Spokesperson Kush Desai said in a comment to USA TODAY. “The data objectively show that inflation has cooled and the environment is ripe for further rate cuts to deliver much-needed cost relief to American businesses and homebuyers.” 

Still, after months of Trump’s browbeating the current Fed chair, watchers of the Federal Reserve aren’t so sure.

The president’s choice could come any day. The last time Trump announced a nomination for Federal Reserve chair was Nov. 2, 2017, when he selected Jerome Powell. Powell was reappointed by former President Joe Biden, and the chair’s term ends in May 2026. Since retaking the White House in January, Trump has hit Powell with insults, nicknames like “Too Late” and a deluge of social media posts calling for lower rates.

Meanwhile, the FOMC is preparing for its final meeting of 2025, scheduled for Dec. 9 and 10. It is unclear whether officials will adjust the benchmark interest rate, given signs of a cooling labor market, persistent inflation, and recent gaps in government data.

U.S. Treasury Secretary Scott Bessent said there was “a very good chance” the president will make the announcement before Christmas, telling CNBC there are “five very strong candidates.”

More: Fed faces another tough rate decison with inflation and job data delay

Why this appointment matters

The Federal Reserve Chair is the most visible position at the nation’s central bank, responsible for leading U.S. monetary policy efforts to promote stable prices and maximum employment. 

“All Americans understand the importance of both those things in the current context, in this affordability crisis,” Moody’s Analytics’ Chief Economist Mark Zandi said. “Nobody is better positioned to achieve those goals for the American people than the Fed chair.” 

As a member of the Fed’s Board of Governors, the chair also helps oversee regulation for banks and other financial institutions. 

Few wield comparable influence over the U.S. economy. A Fed chair’s statements can move markets within minutes, influence borrowing costs, and shape economic expectations. 

“The stakes here are very high because global investors and capital markets are going to be watching,” said Dennis Lockhart, former president of the Atlanta Fed.

They report to and testify before Congress, meet periodically with the treasury secretary, and often speak directly to the American people following Federal Open Market Committee meetings. 

Traditionally, they also serve as chair of that committee, which sets the target range for the federal funds rate – a benchmark that influences rates on credit cards, loans, and savings accounts across the country.

What Trump is likely looking for

Trump is looking for loyalty and someone he can trust to support his push for lower rates, said David Beckworth, a senior research fellow at the George Mason University’s Mercatus Center.

While the decision is ultimately up to the president, Bessent leads the search. Narayana Kocherlakota, former president of the Minneapolis Fed, said he thinks Bessent wants someone who will aim for the goals Congress has established for the organization and run the Fed without wasting resources.

“On the other hand, I think President Trump‘s perspective is that he’s looking for someone who is going to be loyal to his administration,” Kocherlakota said. “That’s a real divide.” 

Peter Conti-Brown, a professor at the University of Pennsylvania’s Wharton School, said Bessent understands American credibility depends on the Fed’s credibility, which reassures him “in some sense.”

Trump’s past nominations, however, don’t inspire confidence in Conti-Brown. He said the president’s latest appointment to the Federal Reserve’s Board of Governors, Stephen Miran, “had no relevant expertise.” Nor did Judy Shelton, Trump’s nominee to the board who failed to pass Senate confirmation in 2020, he added.

“If that portends the kind of appointment they will make for Fed chair, that’s not a good sign,” Conti-Brown said. 

Beckworth added he thinks interest costs on the national debt are motivating Trump’s calls for rate cuts. The president may want a chair who understands growing fiscal pressures and someone who supports increased facilitation of crypto assets at the Fed.

Who fits the profile?

Speaking to reporters on Nov. 18, Trump said he thought he already knew his choice. He pointed to Bessent, saying he’d like the treasury secretary to take on the role, but that Bessent refused the offer. 

“We have some surprising names and some standard names that everybody’s talking about,” Trump said. “We may go the standard way. It’s nice to every once in a while go politically correct, but we have some great names.” 

In August, Trump confirmed he was considering Kevin Warsh, a former member of the Federal Reserve Board of Governors, and Kevin Hassett, his director of the National Economic Council, for the role. Bloomberg recently reported Hassett is a frontrunner.

A “surprising” name could mean someone like Miran, according to Beckworth, whose top pick would be Fed Gov. Christopher Waller. Waller has recently advocated for lower rates and is respected by other Fed officials, Beckworth said.

“He could lead a divided FOMC probably better than any of the other choices,” Beckworth said. “Kevin Hasset or Kevin Warsh – they’re going to come in as outsiders, as people who have been really critical… Now you have to come and lead these people you’ve been criticizing.”

How the Fed could change under new leadership

Kocherlakota said if the next Fed chair is viewed as setting interest rates to serve the president’s political goals, markets could assume rates will stay low even when they should rise, pushing long-term inflation expectations higher. 

“When people are making mortgage loans, for example, they feel like they have to be compensated for whatever inflation is going to be in the future,” Kocherlakota said, adding if the new chair “is seen as being too beholden to the president, we could see a very big spike in the longer term interest rates.” 

While the Fed chair’s influence is vast, they can’t act alone. The FOMC, which sets the federal funds rate, has 12 voting members.

“New chairs have to earn the confidence and respect of the Federal Open Market Committee, as well as the staff, and have to respect the prevailing ethic, which is adamantly nonpartisan, apolitical, where decisions are made by consensus and are data dependent,” Lockhart said. “If the chair does not enjoy that respect, and here I would be speculating, then someone else on the committee could very well become the unofficial key voice on that committee.” 

He said he thinks the current lineup of Fed governors can be expected to preserve the central bank’s independence. 

Beckworth added even if Trump appointees eventually make up the majority of the Fed’s seven-person Board of Governors, those members aren’t guaranteed to always agree.

What happens next

Once Trump nominates his pick, that person will be subject to confirmation by the Republican-controlled Senate.

Lockhart said he isn’t convinced senators will confirm just anyone Trump wants.

“Behind closed doors, senators are extremely responsible about the quality of the person they put into that job,” Lockhart said. “If a ‘surprising’ candidate were put forward who did not strike the senators as being qualified, there could be substantial pushback.”

Because Trump appears likely to announce his pick well in advance, the nominee’s views on the economy and monetary policy may start carrying more weight before they step into the role. 

“Hopefully the nominee will try to stay out of the way of Jay Powell while he’s chair,” Zandi said. “That will also be a tell as to how independent the Fed will be going forward. If Jay Powell’s voice is respected, that’s a good sign that independence will be maintained.” 

Reach Rachel Barber at rbarber@usatoday.com and follow her on X @rachelbarber_