Donald Trump may name a ‘shadow' Fed Chair by September; what happens to Jerome Powell? Analysts decode
US President Donald Trump has said that he will announce a successor to Federal Reserve Chairman Jerome Powell as early as this summer even as the Fed chair's tenure is set to be over next May.
A Wall Street Journal report on Wednesday said that Trump could name the next Fed chair by September or October, or as early as this summer.
With Powell having nearly 11 months left until the end of his term, Trump remains frustrated as he continues to criticise the Fed chair's move of not cutting interest rates despite muted inflation.
However, announcing the name of the next Fed chair this far in advance would be a surprising development in the 111-year history of the US.
Donald Trump may name a 'shadow' Fed chair
At the White House on Wednesday, National Economic Council head Kevin Hassett said that the next Fed chair is not going to be Jerome Powell.
"I think the President will choose the person that he likes, and it's not going to be Jay Powell," Hassett said.
Hasset, along with three others — former Fed Governor Kevin Warsh, current Fed Governor Christopher Waller, and Treasury Secretary Scott Bessent — are among the top contenders for the post of the American central bank's head, according to reports.
Also Read | Trump considers naming next Fed chair early in bid to undermine Powell
The person, if Trump goes ahead with the appointment right now, could act as a 'shadow' Fed chair — an idea Scott Bessent first floated in 2024 before he became the Treasury Secretary.
What happens to Jerome Powell?
Some analysts see Trump's naming of the next Fed chief as an effort to influence monetary policy through a "shadow" Fed chair even before Powell leaves office in May 2026.
According to former Fed officials and academics cited by Fed, the move could also mean that the economic uncertantly that has prevailed after Trump took office could intensify.
'It's an absolutely horrible idea,' Alan Blinder, who served as the No. 2 official at the Fed during the mid-1990s, was quoted as saying by CNN.
A shadow Fed chair may mean that markets could be put in an uncertain position if two powerful voices say the opposite about the monetary policy, he said.
'If they're not singing from the same playbook, which seems likely, this is just going to cause confusion in markets,' Blinder told CNN.
Greg Valliere, chief US policy strategist at AGF Investments, made similar comments, according to the report of the news outlet.
'This is a terrible idea, sure to annoy and confuse financial markets if there are two Fed Chairs,' he said.
RSM chief economist Joe Brusuelas warned that naming a shadow Fed chair this early could cause a spike in interest rates — undermining the very goal that Trump is trying to achieve.
'Undermining Powell is in no one's best interest as it will almost certainly translate to a weaker dollar and rising rates,' he was quoted as saying by CNN.
White House denies reports
The White House on Thursday dismissed reports of Donald Trump naming a Fed chair so soon to replace Jerome Powell next year.
'No decisions are imminent, although the president has the right to change his mind,' AFP quoted a White House official as saying.
'The president has many good options to nominate as the next Federal Reserve chairman,' the official added.
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