Trump considers naming next Fed chair early in bid to undermine Powell

In recent weeks, the president has toyed with the idea of selecting and announcing Powell’s replacement by September or October, according to people familiar with the matter. One of these people said the president’s ire toward Powell could prompt an even-earlier announcement sometime this summer.

Trump is considering former Fed governor Kevin Warsh and National Economic Council director Kevin Hassett, according to people familiar with the matter. Treasury Secretary Scott Bessent is being pitched to Trump by allies of both men as a potential candidate, some of these people said. Other contenders include former World Bank President David Malpass and Fed governor Christopher Waller.

Because the new chair wouldn’t take office until next May, announcing the pick this summer or fall would be far earlier than the traditional three-to-four month transition period. An early announcement could allow the chair-in-waiting to influence investor expectations about the likely path for rates, like a backseat driver, attempting to steer monetary policy before Powell’s term ends.

When asked if Trump was entertaining an earlier Fed chair announcement, the White House said the Fed should pursue a growth-oriented monetary policy.

“The Administration is now laying the groundwork—including with The One, Big, Beautiful Bill—to turbocharge economic, job, and investment growth, and it’s high time for monetary policy to complement this agenda and support America’s economic resurgence," White House spokesman Kush Desai said.

Powell has said politics don’t enter into the Fed’s deliberations. After several years of high inflation gave businesses more experience passing along cost increases, many central bank officials want to make sure cost increases from tariffs won’t rekindle inflation.

“If we make a mistake here, people will pay…the cost for a long time," Powell told a Senate committee on Wednesday. Rate cuts this year are possible, but “we’re going to take a careful approach."

Bessent has previously said the administration won’t begin to interview candidates for the job until September.

The president on Wednesday hinted that he’s ready to move more quickly. “I know within three or four people who all I’m going to pick," Trump said during a press conference at the NATO summit. “He goes out pretty soon, fortunately, because I think he’s terrible."

Trump faces an overarching challenge as he seeks to bend the historically independent institution to his will: Find someone who will prove both loyal to the president’s desires for an easier interest-rate policy and skilled at persuading the Fed’s broader rate-setting committee to fall in line. Fed policy is set by a committee of 12 policymakers, a majority of whom Trump won’t be able to pick unless sitting governors leave their seats early.

The Fed has guarded its autonomy to set monetary policy ever since the very high inflation of the 1970s, which followed President Richard Nixon privately pressuring his Fed chairman to keep rates low ahead of the 1972 election.

Warsh, a former Fed governor who advised President George W. Bush, is among the top-tier contenders. Trump spoke to Warsh earlier this year about replacing Powell with him even before the current chair’s term ends. Trump also interviewed Warsh last fall for Treasury secretary.

At a private audience of finance professionals in Boston this month, Warsh said he thought Powell would serve out his term. But he added, “I wouldn’t be shocked if the president made a nomination sooner than would be customary, just to…try to make a lame duck lamer or something like that," according to remarks reviewed by The Wall Street Journal.

Some close to Trump harbor reservations that Warsh would be a maverick once he takes the job, particularly given his past views that identify him as a so-called policy “hawk," meaning someone who has worried more over the years about inflation than employment.

“My fatal flaw is I say what I believe," Warsh told the Boston audience when someone asked about his hawkish reputation. “If the president wants someone who is weak, I don’t think I’m going to get the job."

In his Boston remarks, Warsh praised the current head of the Bank of Japan, Kazuo Ueda, who has overseen an effort to reverse decades of ultra-easy monetary policy, calling him “the most talented central banker on the planet right now." Warsh also repeated his distaste for very low interest rates. “When things are free—when rates are zero, that leads to very bad economic outcomes," he said.

When Trump interviewed Warsh for the job eight years ago, he frequently remarked on Warsh’s handsome hair and appearance; after picking the silver-haired Powell, who is 17 years older than Warsh, Trump told associates he thought Warsh, who was then 47, was too young-looking for the role.

Hassett, another possible contender, has told people he isn’t interested in the job.

Others close to Trump are pushing the candidacy of Bessent, whose ability to navigate a chaotic rollout of tariff policies has made him popular on Wall Street.

Though Bessent has publicly said he is committed to serving out his term as Treasury secretary, people close to both him and Trump say the longtime investor has raved about the idea of one day becoming Fed chair and hasn’t privately ruled out the idea.

Bessent told lawmakers earlier this month he’s “happy to do what President Trump wants me to do."

Having a personal rapport with Trump could help. Trump barely knew Powell when he picked the then-Fed governor to become chair for a term starting in 2018. Trump doesn’t want to repeat what he perceives as his mistake of selecting someone who won’t be unstintingly loyal, people familiar with the matter said.

More recently, Trump has sounded out aides about Malpass, whom Trump named to run the World Bank in his first term, some of the people said. Trump has warmed to Malpass as a potential Fed chair due to his recent support for lowering rates, these people said. Malpass dinged the Fed’s models as antiquated in a Journal opinion article this month in which he called for rate cuts.

But during conversations at recent private lunches and dinners about who should replace Powell, the president has privately raised doubts over whether Malpass has the right made-for-TV appearance.

People who have spoken with the president have also said he is asking about Fed governor Waller. Waller is regarded as a long shot because even though Trump selected him to serve on the Fed’s board five years ago, Trump doesn’t know him well.

Waller’s appeal is partly tactical. The Fed’s rate-setting committee includes all seven presidentially-appointed and Senate-confirmed governors on the Fed board plus five regional bank presidents, who take turns voting every year and are appointed by their bank boards.

Fed governor Adriana Kugler’s term is up at the end of January. If Powell leaves the Fed board after his term as chair ends, Trump would be able to name two additional governors and would rely on those appointees to persuade the broader committee.

Waller has gained White House attention for being the first policymaker to advocate for cutting rates as soon as the Fed’s next meeting, in late July.

In a television interview last week, he warned of the risk of waiting too long to cut rates. “We’ve been on pause for six months, thinking that there was going to be a big tariff shock to inflation. We haven’t seen it," Waller told CNBC.

Waller’s support for cuts shows how the succession drama is beginning to influence Fed policy debates. On Monday, Hassett approvingly cited Waller in calling for the Fed to resume rate cuts.

Trump has shifted tactics several times this year. In April, he threatened to sack Powell and then reversed himself as market jitters worsened. The two men met in the Oval Office last month.

Jerome Powell has repeatedly declined to say whether he would step down from the Fed board after his term as chair ends.

Announcing the Fed pick early has drawbacks both for Trump and the chair-in-waiting. It could put the incoming chair in an awkward spot of publicly criticizing his or her future Fed colleagues—whose support will be needed if he or she wins Senate confirmation—and being judged by market participants as a sycophant. Alternatively, the shadow chair might defend the Fed’s moves, upsetting Trump and losing the job before even taking office.

“The earlier Trump names his pick, the bigger the bull’s-eye on that person’s back, and the less likely that that person is the actual successor to Powell," said Douglas Rediker, a Washington-based economist and policy consultant.

Last fall, Bessent publicly pitched naming a “shadow chair" that would allow the administration to do an end-run around Powell. Billionaire investor Stanley Druckenmiller, who is Bessent’s mentor and Warsh’s business partner, later called it “a horrible idea and irresponsible." In an interview days after Trump’s election, Bessent withdrew his support for it.

The shadow chair gambit carries some risk for Trump because Powell doesn’t have to leave the Fed’s board until 2028, meaning he could choose to stay for 1½ years after his term as chair ends. Powell has repeatedly declined to say whether he will step down from the board when his term as chair is over.

At a congressional hearing on Tuesday, Powell said he wasn’t focused on any of the recent political drama. “All I want to do in what’s left of my time at the Fed is to have the economy be strong and have inflation be under control," he said. “I want to turn it over to my successor in that condition…. That’s the only thing I think about."

Write to Brian Schwartz at brian.schwartz@wsj.com and Nick Timiraos at Nick.Timiraos@wsj.com