In a dramatic shift in the race to succeed Jerome Powell as Federal Reserve chair, former Federal Reserve Governor Kevin Warsh has sprinted ahead, according to prediction markets, following remarks from President Donald Trump that suggested National Economic Council Director Kevin Hassett would remain in his current role.
Trump's Remarks Shift Dynamics
President Trump, during remarks on Friday morning, without explicitly stating his decision, expressed his preference to keep Hassett as his top economic advisor. “I see Kevin's in the audience, and I just want to thank you. You were fantastic on television today,” Trump said. “I actually want to keep you where you are, if you want to know the truth.”
These comments immediately impacted the odds in prediction markets. Traders on Kalshi quickly adjusted their bets, raising the likelihood of Warsh getting the job to 59%, compared to just 14% for Hassett. Even current Fed Governor Christopher Waller, who was considered a longshot, pulled ahead of Hassett, with an 18% chance.
Prediction Markets Reflect Rapid Change
As recently as Wednesday, Warsh and Hassett were in a near dead heat, with their odds relatively close. However, the markets on Polymarket mirrored the Kalshi trends, with Warsh leading Hassett 58% to 11% and Waller at 16%. Traders are giving little odds to BlackRock fixed income chief Rick Rieder and Fed Governor Michelle Bowman, who were also considered finalists.
The prediction markets reflect a rapid change in the dynamics of the Fed chair race. Warsh’s sudden surge is attributed to Trump’s remarks, which effectively eliminated Hassett as a viable candidate for the position. This leaves Warsh as the frontrunner, with other candidates trailing significantly.
Trump to Name Successor This Month
Trump has indicated that he will name a successor to Powell this month, although he hasn’t provided a specific date. Powell’s term as chair ends in May, and the appointment of a new leader is crucial for the direction of monetary policy in the coming years.
During his remarks, Trump turned to White House Chief of Staff Susie Wiles and said, “We don’t want to him lose [Hassett], Susie, but we’ll see how it all works out.” This statement further solidified the idea that Hassett’s role as top economic advisor is secure, leaving the door open for Warsh to take the helm at the Federal Reserve.
Warsh's Background and Potential Impact
Kevin Warsh brings a wealth of experience to the table. He served on the Federal Reserve Board from 2006 to 2011 and was a key player during the financial crisis. His tenure at the Fed was marked by a deep understanding of monetary policy and a pragmatic approach to economic challenges.
Experience in Crisis Management
Warsh’s experience in crisis management is particularly relevant given the current economic climate. His ability to navigate complex financial situations could be a significant asset as the Fed faces ongoing challenges related to inflation, employment, and global economic stability.
Policy Philosophy
Warsh is known for his balanced approach to monetary policy, often advocating for measures that support both economic growth and financial stability. His policy philosophy aligns with the goals of the Federal Reserve, making him a strong candidate to lead the institution in the coming years.
Other Candidates in the Race
While Warsh has taken the lead, other candidates remain in the race, albeit with lower odds. Christopher Waller, a current Fed Governor, has experience in monetary economics and has been a vocal advocate for data-driven policy decisions. His odds have increased following Trump’s remarks, positioning him as a potential alternative to Warsh.
Rick Rieder and Michelle Bowman, though considered longshots, bring their own unique perspectives to the table. Rieder’s background in fixed income and Bowman’s experience as a Fed Governor could be valuable in shaping the future of the Federal Reserve.
Implications for the Federal Reserve
The selection of a new Fed chair will have far-reaching implications for the U.S. economy. The chair’s leadership style, policy preferences, and vision for the institution will influence monetary policy decisions in the coming years.
Warsh’s potential appointment could signal a continuation of the Fed’s current policy trajectory, with a focus on maintaining financial stability and promoting sustainable economic growth. His experience and understanding of the Fed’s operations could ensure a smooth transition and steady leadership during a critical period.
Conclusion
As the Fed chair race evolves, Kevin Warsh has emerged as the frontrunner, thanks to President Trump’s remarks about Kevin Hassett. Prediction markets reflect this shift, with Warsh’s odds significantly higher than those of his competitors. The coming weeks will be crucial as Trump finalizes his decision, with the entire financial community watching closely.
With a new Fed chair set to be named this month, the focus will turn to the leadership qualities and policy priorities of the incoming chair. Kevin Warsh’s background and experience make him a strong candidate to lead the Federal Reserve, and his potential appointment could shape the future of U.S. monetary policy.
