Analysis-Early Fed chair nomination could rattle markets

Lewis Krauskopf

Wed, Jun 18, 2025, 5:21 AM 5 min read

By Lewis Krauskopf

NEW YORK (Reuters) -U.S. President Donald Trump has said that he would soon nominate Jerome Powell's successor, with nearly a year left before the Federal Reserve chair's term ends. Investors said that could present a risky proposition for markets.

Trump has made no secret of his displeasure with Powell and the Fed for not lowering interest rates since the president began his second term in January. While Trump has backed off from comments earlier this year that he could fire Powell, and a recent U.S. Supreme Court ruling eased worries that he could do so, he said earlier this month that a decision on the next Fed chair would be coming soon.

Such an announcement, well before Powell's term ends on May 2026, could cause significant unease in markets, investors said.

The potential for a "shadow" Fed chair who offers potentially clashing views with the sitting central bank leader on monetary policy could sow confusion. Any choice deemed as being under Trump's thumb would alarm Wall Street, given the broad sentiment that an independent Fed is critical to its ability to function properly.

"Whomever is appointed, the key thing to monitor is whether they are perceived as being a political appointee," said Eric Winograd, chief U.S. economist at AllianceBernstein. "And by that, I mean someone whose views change with the whims of the president."

The chair of the Fed, which sets U.S. monetary policy and has a mandate to maintain full employment and price stability, is among the most closely followed government officials by Wall Street.

That said, the Fed chair is only one of 18 members on the central bank's monetary policymaking committee and part of the role is to build consensus on the committee.

Markets will want a Fed chair who is "laser focused" on economic balance and its dual mandate, said Callie Cox, chief market strategist at Ritholtz Wealth Management.

"Any Wall Street manager would tell you that Fed independence is the golden rule of markets," Cox said. "To move away from that can introduce a whole host of issues."

An unconventional choice for the Fed would present a potential wildcard for markets if announced in the next few months, said Jason Draho, head of asset allocation Americas at UBS Global Wealth Management.

"It's a risk that exists if people are too complacent on how this could all play out," he said.

The Fed has no open spots that Trump could fill temporarily until January when Adriana Kugler's term on the Board of Governors ends.