Kevin Hassett has become the main candidate for the position of Federal Reserve Chair. If he replaces Jerome Powell in May next year, this could change the course of US monetary policy and impact global markets. Especially if he really takes a softer approach, as many investors expect.
This week, Bloomberg published a piece that sparked a sharp spike in interest on prediction platforms. On Polymarket, Hassett’s chances of becoming Fed Chair rose from 25% to 57%.
This is well ahead of the second most popular candidate, Fed Board member Christopher Waller, who has 26%. Since last July, he has consistently voted for rate cuts, diverging from the main course of the regulator.
Although the White House called the rumors premature, Hassett’s growing popularity is already noticeable and investors are paying attention.
What Hassett Thinks About Tariffs and Inflation
Kevin Hassett, who currently heads the National Economic Council, questions Wall Street’s conventional views on inflation. This especially concerns Donald Trump’s tariff policy.
In an interview with Bloomberg, he referred to a study by the San Francisco Fed. It examined a hundred years of trade policy and concluded that tariffs more often restrain inflation than accelerate it.
“Wall Street’s inflation forecasts did not come true. There was no surge,” Hassett said.
He also noted that by the end of the year, core inflation by the PCE index could be 2.9–3%. This index is a key benchmark for the Fed when assessing price dynamics.
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According to Hassett, tariffs act as a demand shock. They reduce consumption and therefore pressure on prices. This approach fits well with his reputation as a supporter of a softer monetary policy.
How Markets Might React to Hassett’s Appointment
Tiffany Wilding, economist at Pacific Investment Management Co., believes Hassett’s views on interest rates are close to Trump’s team.
“He is definitely softer than most of the current committee,” she noted.
Although Powell’s term formally ends only in May 2026, Hassett could join the leadership earlier. This opportunity will arise as soon as January, when Steve Miran’s seat becomes vacant.
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Even if Hassett is appointed, he will still have to secure the support of other FOMC members before pushing for rate cuts.
“The committee makes decisions collectively. Hassett will have to convince the others. A simple appointment will not be enough,” Wilding reminded.
She also emphasized that it is not certain Powell will leave the Board of Governors, even if he steps down as chair.
Hassett’s Appointment Could Increase Pressure on the Dollar and Bond Market
Wilding warns: if the Fed goes for a sharp and rapid rate cut, it could hurt its reputation. Investors will begin to doubt the long-term reliability of the central bank. This, in turn, could push long-term bond yields up.
Matthew Ryan, head of strategy at Ebury, believes the news about Hassett could weaken the dollar. He notes that Hassett is considered the “softest” candidate among possible contenders. He has previously stated support for much lower Fed rates.
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So far, the dollar is reacting calmly. But Ryan does not rule out an acceleration of its decline as Powell’s possible departure approaches.
David Morrison from Trade Nation adds: Hassett’s soft stance is a signal of potential policy easing. Such a scenario could worry bondholders, especially if inflation rises again.
