Federal Reserve Chair Jerome Powell testifies before a Senate Committee on Banks, Housing and Urban Senate during a hearing in Caption Hill in Washington, D.C. on June 25, 2025 to “consider the six-monthly monetary policy report.”
Kent Nishimura | Getty Images
Federal Reserve Chair Jerome Powell was primarily refreshing through two hearings at Capitol Hill this week, but is now heading towards a much bigger challenge. It is a threat that could undermine his authority by quickly naming his choice to lead the central bank next year.
As Powell testified before the Senate Banking Committee on Wednesday, he held heartfelt interactions with lawmakers, and Trump was at the NATO summit in The Hague, where he lobed his latest attack on a man who had been nominated for a Fed job nearly eight years ago.
“I think he’s terrible,” Trump said at a press conference when asked about his intentions as the next Fed leader. Trump then called Powell “a very average mental person,” adding that he “has a low IQ for what he’s doing” and is a “very political man.”
“I think he’s actually a very stupid person,” Trump said.
Calling Trump’s Powell’s name is nothing new, but words can now inform action.
Potential candidates
The fierce criticism has led Wall Street to be messed up the possibility of a “shadow chair” or to be set up as central bank Gadfly until Powell’s term expires in May 2026.
According to data from the CME Group, the talk had an impact on the market. The Treasury fell on the short edge of the curve. This is where the Fed has that effect, falling much more than people on the long edge. The dollar also dropped significantly against its global counterparts.
Without naming the finalists, Trump confirmed that Powell’s potential successors list is “three or four.”
The executives of potential candidates have become familiar. We pick Treasury Secretary Scott Becent, Director of the National Economic Council Kevin Hassett, former Fed Gov. Kevin Wahsh, and Trump’s appointee to serve as governor as the dark horse and recently support lower interest rates.
In some circles, Bescent is considered a front runner, but sources familiar with Trump’s ideas say that isn’t necessarily the case. Bescent himself says he’s not interested in the job, but that could change if Trump asks him to take it.
On Wednesday evening, a Wall Street Journal report suggests that former World Bank President David Malpus is also on a run. The journal report showed that Trump is considering naming his successor earlier than expected in an attempt to influence interest rate policies.
White House officials did not respond to requests for comment that went beyond Trump’s remarks at the press conference.
Active FED
There are a few issues that Trump wants to name the chair and wants something that is problematic. For one, Governor Adriana Cooler’s term ends in January 2026, although there is no immediate open position. Powell’s term as governor will not expire until 2028, but the chairman’s term will be next year.
“The plan will probably not be the constitution and will politicize the Fed a few months before stability recovers in May next year,” Greg Valliere, chief strategist of the AGF perspective, observed Thursday. “But if Trump becomes a financial backseat driver this fall and becomes a second-guessed federal policy, the damage to the Fed’s independence will be substantial.”
The latest Trump Powell turmoil is coming at a busy time for the central bank.
Over the past few days, the Fed has taken two important measures aimed at banking. The criteria for banking examinations seem to include removing “reputation risk,” Trump’s complaints about politically motivated banking at large institutions, and relaxing systematically important bank reserves. The latter measure was promoted by the vice-chairman for overseeing Trump’s appointee Michelle Bowman, but at best is someone considered outsider who wishes to be the “Shadow Chair” finalists.
Nevertheless, Trump’s biggest grievance, the refusal of the Powell-led Federal Open Market Committee to cut interest rates, remains dependent.
Chicago Federal President Austan Ghoolsby told CNBC in an interview Thursday that political waves are not a factor in decision making, nor is it the naming of the shadow chair.
“That wouldn’t affect the FOMC itself,” Ghoolsby said. “Look at the minutes and transcripts. You can see the words. You can see what the rationale is in your decision-making. They are not about elections, nor about partisan politics.”
