Putting it too close is the opposite of resistance? Hassett's path as chairman of the Federal Reserve changed, and Walsh's presence increased

The Zhitong Finance App learned that on Monday, a number of people familiar with the matter revealed that the candidate originally viewed by the market as an “almost impeccable” candidate, Kevin Hassett (Kevin Hassett), director of the White House National Economic Council, has recently experienced some resistance within senior circles, and these people have close relationships with US President Trump.

People familiar with the matter said that some opposition voices are concerned that Hassett's relationship with Trump is too close. Ironically, it was this “close to the president” characteristic that initially made him a popular candidate to replace current Federal Reserve Chairman Powell. This disagreement is also thought to explain why the candidate interview originally scheduled for early December was cancelled and then rescheduled. At least the interview for former Federal Reserve Governor Kevin Warsh (Kevin Warsh) resumed last week.

On Friday, during an interview, Trump said that former Federal Reserve Governor Walsh, along with Hassett, is at the top of the list of candidates for the Federal Reserve Chairman. This statement came as a surprise to the market, and it also quickly impacted predicting market sentiment. “I think both of these Kevins are amazing,” Trump said.

In the Kalshi prediction market, Hassett still ranked first with a probability of 51% on Monday, but it is already significantly lower than the high of more than 80% earlier this month; Walsh's chances of winning rose to 44%, a sharp increase from about 11% in early December.

People familiar with the matter pointed out that this round of “resistance” was more reflected in raising Walsh's voice rather than directly criticizing Hassett. At an event at J.P. Morgan Chase last Thursday, J.P. Morgan CEO Damon gave positive reviews to both candidates, but some of their statements were interpreted by those present as being more biased in favor of Walsh.

The media previously reported at the end of November that as Powell's term ends in May next year, Hassett has become the frontrunner in succession selection. However, after entering December, many sources said that concerns about its candidacy were gradually heating up in the market and policy circles, particularly the possibility of a “rebound reaction” in the bond market.

Some people warned that if investors think Hassett is overly influenced by Trump, they may question whether it has sufficient independence when inflation rises again, thereby boosting long-term treasury bond yields. Instead, this outcome may run counter to Trump's goal of reducing financing costs.

Perhaps in response to these questions, Hassett made a rare, more clear statement about the independence of the Federal Reserve during an interview recently. He said, “The President has a very strong and well-founded view of what we should do. But ultimately, the Federal Reserve's role is to maintain independence and work with the Board of Governors and Federal Open Market Committee (FOMC) members to reach a collective consensus on the interest rate path.”

When asked if the president's views would have the same weight as central bank officials who have voting rights, Hassett clearly responded: “No, not at all. He doesn't have any authority. This is just his opinion; if the opinion is based on data and is reasonable, then it has reference value.”