Amid the typical panels and the more attention-grabbing geopolitical debates making headlines, the annual World Economic Forum in Davos, Switzerland, is hosting a high-stakes drama: who will become the next chair of the U.S. Federal Reserve, and on what conditions.
President Donald Trump is approaching an announcement regarding who should lead the Federal Reserve once Jerome Powell’s term ends in May. Treasury Secretary Scott Bessent is involved, and speculation is intensifying that he could make the announcement during his Davos address on Wednesday. Although Trump has claimed for weeks that he already knows his choice, he has transformed what is usually a dull confirmation process into a political spectacle—something some analysts have compared to a “Celebrity Apprentice”-style revelation. What started as showmanship has now developed into a full-blown institutional standoff among the Justice Department, Senate members, and nervous financial markets analyzing every hint about whether the next Fed chair will be dovish or hawkish.
The search process has been disrupted by a Department of Justice investigation into Chair Powell centered on renovations at the Federal Reserve’s headquarters. Powell has publicly denounced the investigation as a “” for political intimidation, a sentiment echoed by a bipartisan coalition of former Fed chairs and current GOP Senators. Senator Thom Tillis of North Carolina has already signaled a potential blockade, vowing to oppose any nominee until the DOJ investigation is fully resolved. This move could prevent Trump’s pick from even reaching a floor vote, at least in the near future.
The rise and fall of Kevin Hassett
For much of the past year, National Economic Council director Kevin Hassett seemed to be the natural heir apparent. A veteran of Republican economic policymaking and a key architect of the 2017 tax overhaul, Hassett enjoys credibility with both GOP lawmakers and Fed officials.
Yet his prominence within the Trump administration has become a liability. Hassett has emerged as one of the White House’s most visible economic messengers, frequently defending administration policy on television. He’s good at that unappealing job, Trump said on Friday, and the president is afraid of “losing him” in that position.
“I’m saying, wait a minute, if I move him, these Fed guys, certainly the one we have now, they don’t talk much,” Trump told reporters at a White House event, then addressed Hassett, who was listening in the audience. “I would lose you. It’s a serious concern to me.”
suggest the move reflects a practical calculation by the administration; given the toxic environment surrounding the Powell investigation, Hassett’s close political ties to the President might have made him an unacceptable candidate for a Senate Banking Committee determined to reassert the Fed’s institutional independence.
Markets were unhappy about the potential loss of a clear Fed dove, however, and the 10-year-treasury reached a four-month high on Friday.
The original “central casting” pick: Kevin Warsh
As Hassett’s prospects narrow, attention has increasingly shifted back to Kevin Warsh, a former Fed governor who led the forced takeovers and bailouts during the 2008 financial crisis before publicly disagreeing with Chair Ben Bernanke over quantitative easing, in which the Fed creates money to buy bonds to lower interest rates.
Warsh is widely regarded by markets as the “independence candidate,” hawkish on inflation, skeptical of political pressure, and institutionally orthodox. The more toxic the Powell investigation becomes, the stronger Warsh’s appeal grows among senators eager to reassert the Fed’s credibility. He was in the final running for Fed chair against Powell in 2017, and while he was complimented () by Trump for his good looks, he was ultimately passed over because of his relative youth.
In the second Trump term, Warsh is not only 55, but has seen his main doctrines become more popular. His famous slogan, “inflation is a choice,” refers to his belief that the Fed raises interest rates when the economy “grows too much” and workers “get paid too much,” rather than due to actual inflation. He has warned for that the government’s $38 trillion debt is influencing the Fed’s decision-making, encouraging it to keep interest rates artificially low to reduce the cost of servicing the debt. Now that many economists and politicians Warsh’s views might be acceptable to the markets and his potential fellow Fed governors.
The quieter option: Christopher Waller
But if Warsh is also considered too political, Trump may turn to a quieter option, Christopher Waller. A current Fed governor with a reputation for accurate forecasting, Waller is seen by many as the technocratic fallback: less politically exposed, less polarizing, and potentially easier to confirm. When a group of CEOs was given a live poll at the Yale event about who they wanted for Fed chair, 81 percent chose Waller.
That’s likely because Waller has consistently argued for more rate cuts, while also having a lack of academic research to support his stance on the importance of Fed independence to protect him from claims that he is politically influenced. That ability to navigate the situation is more crucial now than ever.
Dark horse: Rick Rieder
Markets might be delighted if Trump announces BlackRock executive Rick Rieder as the unexpected pick. The only person on the shortlist with no Fed experience, something in the administration, Rieder oversees $2.4 trillion in bonds as the Chief Investment Officer of Global Fixed Income. He has also openly called for a lower neutral interest rate, stating that AI gains will be disinflationary and that the Fed’s challenge now is to avoid “labor potholes.”
As the Davos summit begins, the focus remains on the “Two Kevins” and the impending decision that will shape the American economy for the latter part of the Trump era.