Between the usual panels and buzzier geopolitical debates grabbing headlines, the annual World Economic Forum in Davos, Switzerland, is playing host to a high-stakes drama: Who will emerge as the next chair of the U.S. Federal Reserve, and on what terms?
President Donald Trump is nearing an announcement on who should lead the Federal Reserve once Jerome Powell’s term ends in May, according to Treasury Secretary Scott Bessent, and speculation is growing that Trump could do so during his Davos address on Wednesday. Although Trump has claimed for weeks that he already knows his pick, he has appeared to relish turning what is typically a staid confirmation process into a political spectacle—what some analysts have likened to a Celebrity Apprentice–style reveal. What began as showmanship has now evolved into a full-blown institutional standoff among the Justice Department, members of the Senate, and jittery financial markets parsing every hint about whether the next Fed chair will lean dovish or hawkish.
The search process has been upended by a Department of Justice investigation into Chair Powell, centered on renovations at the Federal Reserve’s headquarters. Powell has publicly decried the investigation as a “pretext” for political intimidation, a sentiment echoed by a bipartisan coalition of former Fed chairs and sitting GOP senators. Sen. 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 foreseeable future.
The rise and fall of Kevin Hassett
For much of the past year, National Economic Council director Kevin Hassett appeared 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 GOP lawmakers and Fed officials alike.
Yet his prominence inside 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 unsavory 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 said to 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.”
Analysts suggest the move reflects a pragmatic 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 impossible sell 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 closed on a four-month high Friday.
The original ‘central casting’ pick: Kevin Warsh
As Hassett’s path narrows, 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 breaking with Chair Ben Bernanke over quantitative easing, in which the Fed creates money to buy bonds to push down interest rates.
Warsh is widely viewed 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 praised (many times) by Trump for his good looks, he was ultimately passed up because of his relative youth.
In the second Trump term, Warsh is not only 55, but has seen his main dogmas grow more in vogue. 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 owing to real inflation. He has warned for years that the government’s $38 trillion debt is influencing the Fed’s decision-making, incentivizing it to keep interest rates artificially low to reduce the cost of servicing the debt. Now that many economists and politicians have begun warning of “fiscal dominance,” Warsh’s views might be palatable 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 sitting 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 at a recent Yale event responded to a live poll about who they wanted for Fed chair, 81% chose Waller.
That’s likely because Waller has consistently argued for more rate cuts, with little evidence he is politically captured. That ability to thread the needle is more important now than ever.
Dark horse: Rick Rieder
Markets might rejoice if Trump announces BlackRock executive Rick Rieder as the dark-horse pick. The only person on the short list with no Fed experience—something considered a positive in the administration—Rieder oversees $2.4 trillion in bonds as BlackRock’s chief investment officer of global fixed income. He has also vocally called for a lower neutral interest rate, noting 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 looming decision that will define the American economy for the latter end of the Trump era.
What happens next
If Trump does use his Davos address to name Jerome Powell’s successor, the pick would still need to get past the Senate Banking Committee to make it to the floor for a vote. If the DOJ investigation doesn’t get resolved, Trump might not be able to get anyone through the GOP coalition on the banking committee that is standing by Powell.
But investors are betting that Powell will not be indicted, and Justice Department official Jeanine Pirro, who apparently spearheaded the investigation, has softened her posture slightly, writing on X that the matter is just a question of Powell responding to Justice Department “outreach.”
