Kevin Hassett’s candidacy is rapidly coming to the forefront in the race for the chair of the Federal Reserve, and markets are already signaling their approval. As Donald Trump prepares to announce his pick, government bond yields are falling, and the likelihood of a softer Fed policy in 2026 is increasing.
The market responded to rumors with falling yields
Hassett, who heads the White House National Economic Council, carefully avoided a direct answer in a TV interview about whether he considers himself the frontrunner. However, he noted: the market’s reaction speaks for itself.
After the first reports of his possible nomination, Treasury yields went down. The latest Treasury auction performed better than expected, and the market showed increased demand. For investors, this was a signal: the probability of cheaper loans and a softer Fed policy has increased.
‘We saw rates go down, and I think Americans can expect President Trump to choose someone who will provide affordable auto loans and lower mortgage rates,’ Hassett said.
Trump ready to make an announcement
The president told reporters that he has already decided on a candidate and will announce it ‘very soon.’ However, he did not confirm that it was Hassett.
According to Kalshi prediction markets, Hassett’s odds have risen to 65%—up from 40% at the start of the week. Other contenders are lagging: Christopher Waller—15%, former Fed governor Kevin Warsh—13%.
According to sources close to the process, Trump values Hassett for supporting his economic line: protectionism, tariffs, and the idea of more aggressive rate cuts. Hassett himself has previously said he is ready to head the Fed if the president offers him the role.
The question of Fed independence is central again
If Hassett is nominated, he will have to prove that he can keep his distance from the White House. Investors are watching closely to see whether his appointment will lead to conflict with the Fed committee.
Some analysts believe Hassett could become too dependent on the president’s wishes. But his thesis about the ‘positive market reaction’ was essentially an attempt to counter concerns about political pressure on the central bank.
Interestingly, even the mere expectation of his nomination pushed the yield on 10-year bonds slightly below 4%. For the market, this is a direct hint: participants see a chance for accelerated rate cuts.
Who else is on the list
Among alternative candidates:
- Christopher Waller — member of the Fed Board of Governors
- Michelle Bowman — Board member
- Kevin Warsh — former Fed governor
- Rick Rieder — Chief Investment Officer at BlackRock
In addition, Trump has repeatedly said he would like to see Treasury Secretary Scott Bessent as Fed Chair. But Bessent himself has publicly declined the idea.
Any candidate will have to be confirmed by the Senate. If the president chooses an ‘outsider,’ that person will receive a 14-year term on the Board of Governors and take office in February. The mandate of current chairman Jerome Powell expires in May.
Why this matters for the market
The Fed rate has become the main factor of volatility in recent months. Trump is already openly dissatisfied with the pace of its reduction. Powell is acting cautiously, while the market demands more.
Hassett’s candidacy, who supports the idea of accelerating the easing cycle, could radically change expectations for 2026. Against this backdrop, the dollar, bonds, and the stock market are reacting to even the slightest signals from the political bloc.
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