United States President Donald Trump has said he has decided on his pick for the next chair of the Federal Reserve.<\/p>\n
While Trump has yet to\u00a0confirm his nominee, one name stands out as the overwhelming favourite: Kevin Hassett, the director of the White House\u2019s National Economic Council.<\/p>\n
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Prediction market Kalshi on Wednesday put the odds of Hassett being nominated at 86 percent, compared with 6 percent for former Fed governor Kevin Warsh and 4 percent for sitting Fed governor Michelle Bowman.<\/p>\n
Why does it matter who leads the Federal Reserve?<\/p>\n
As the central bank of the world\u2019s largest economy, the Fed is arguably the most important financial institution on the planet.<\/p>\n
The Fed performs several key roles in the US economy, including setting monetary policy, supervising and regulating banks, and promoting the stability of the financial system by serving as a lender of last resort.<\/p>\n
The most closely watched of these functions is monetary policy, which the Fed primarily manages by setting interest rates.<\/p>\n
The Fed\u2019s policymaking committee meets eight times each year\u00a0to set\u00a0the federal funds rate, the\u00a0target interest rate at which commercial banks lend to each other on a short-term basis.<\/p>\n
The committee is holding its final meeting of 2025 on Tuesday and Wednesday next week, when it is widely expected to agree on a 0.25 percent cut to the benchmark rate, currently set in the range of 3.75 percent to 4 percent.<\/p>\n
The benchmark rate has far-reaching implications for the entire economy, since banks\u2019 borrowing costs influence the interest rates they charge customers for mortgages, car loans and other forms of credit.<\/p>\n
Typically, the Fed, which has the dual mandate of encouraging employment and keeping prices stable, lowers interest rates when the economy is struggling and raises them when prices are rising too fast.<\/p>\n
Cheaper borrowing encourages businesses to invest and consumers to spend more, stimulating economic growth.<\/p>\n
On the other hand, higher borrowing costs act as a brake on economic activity, helping to bring down inflation.<\/p>\n
Who is Hassett and what is his background?<\/p>\n
Though Hassett is among several names that have been mooted for the top job at the Fed, he stands alone for the amount of time he has spent in Trump\u2019s proximity.<\/p>\n
A career economist, Hassett was appointed as Trump\u2019s top coordinator on economic policy after serving in his first administration as the head of the Council of Economic Advisers, an older, more research-oriented body than the National Economic Council.<\/p>\n
After leaving the first Trump administration in 2019, Hassett\u00a0briefly returned to the White House to serve as an adviser on the COVID-19 pandemic.<\/p>\n
Crucially, Hasset has signalled his support for cutting interest rates faster \u2013 something Trump has been angrily demanding from the current Fed chair, Jerome Powell, for months to little avail.<\/p>\n
Trump has insisted that concerns that his tariffs could spell a return to high inflation are\u00a0overblown and suggested that the benchmark rate should be set as low as 1 percent.<\/p>\n
In an interview with Fox News last month, Hassett said he would be \u201ccutting rates right now\u201d if he were in Powell\u2019s shoes.<\/p>\n
Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics, said Hassett would likely push for faster rate cuts in the role, albeit probably not at the pace Trump would prefer.<\/p>\n
\u201cI think it is likely that Hassett would try to lower the Fed\u2019s policy interest rates, but probably not all the way to the 1 percent level that President Trump has demanded,\u201d Gagnon told Al Jazeera.<\/p>\n
\u201cHe would probably argue that the administration\u2019s deregulation agenda and the AI boom give the economy more room to grow without causing inflation.\u201d<\/p>\n
Before and in between his stints at the Trump White House, Hasset was an economist at the American Enterprise Institute, a conservative think tank, where he published extensively on tax and trade policy.<\/p>\n
Hassett also served as an economic adviser to the presidential campaigns of John McCain, George W Bush and Mitt Romney.<\/p>\n
Prior to getting involved in the world of politics, the economist did stints at Columbia Business School and the Fed\u2019s research and statistics division.<\/p>\n
Why is Hassett\u2019s potential nomination attracting controversy?<\/p>\n
Hassett\u2019s reputation as a Trump loyalist has raised concerns in some quarters about the independence of the Fed.<\/p>\n
The ability of the central bank to make its decisions free from political influence or considerations is widely seen as being crucial to confidence in the US economy.<\/p>\n