The moment of changing the head of the Federal Reserve is approaching, and Trump still doesn't forget to attack Powell, and says that cutting interest rates is the touchstone for the new chairman.

President Donald Trump stated that he would judge the leadership performance and "whether truly qualified" of the new Federal Reserve Chairman based on whether they immediately take action to lower interest rates. It is understood that Trump himself, when asked in a media interview whether quickly lowering the borrowing cost would be a "litmus test" for the Fed Chairman he personally selected, Trump replied unhesitatingly, "Yes." "Yes. Well, this guy also..." Trump said in a media report published on Tuesday accepting an interview with Politico, referring to current Federal Reserve Chairman Jerome Powell. "I don't think he's either smart or likes the Trump administration," Trump emphasized in the interview. Trump's latest comments undoubtedly send a crucial signal to potential new Federal Reserve Chairmen: what expectations the U.S. President would have of them if nominated to lead the most influential central bank in the world. Kevin Hassett, Director of the White House National Economic Council, has been reported by several U.S. media outlets as the frontrunner in the race for the Federal Reserve Chairman position, last month stating that all data indicated the Fed should cut interest rates "right now." The market is also betting heavily on Hassett, who is extremely dovish, taking over. Several pay-to-play prediction markets have been "running wild" in recent days, giving a high probability to Hassett's extremely dovish positions. As of Monday afternoon, the probability from the pay-to-play betting market Kalshi is 79%, PredictIt set it at 75%, and Polymarket at around 63%, indicating strong betting probabilities exceeding 60%, with the scenario of "Trump not announcing before Christmas" ranking second highest at 22%, easily surpassing the probabilities of the other four finalists for the Federal Reserve Chairmanship. When asked in the Politico interview about detailed discussions with these potential nominees for Federal Reserve Chairman, Trump did not give a direct response but provided a vague answer. Federal Reserve Echo: Independence Test for Hassett After Taking Office Notable Wall Street Journal reporter and so-called "Federal Reserve Echo" Nick Timiraos recently wrote an article stating that if President Trump ultimately nominated Hassett, it would be because he met two key criteria for Trump: loyalty and market reputation. However, the potential candidacy of Hassett, who is extremely dovish and staunchly supportive of Trump's decisions, has raised deep concerns about whether he can maintain the central bank's independence under political pressure. It is worth noting that Hassett recently passed a market test: after a report named him as the frontrunner for Federal Reserve Chairman, long-term Treasury yields significantly declined. Hassett cited this as evidence in a recent interview, indicating that he can meet Trump's demand for lower rates while not sacrificing the Fed's credibility in combating inflation and lowering long-term Treasury yields. However, the hedge fund Man Group recently stated that if the bond market starts questioning the independence of the next Federal Reserve Chairman, the Fed may have to resort to quantitative easing (QE) to lower long-term borrowing costs. Kristina Hooper, Chief Market Strategist at Man Group, wrote on LinkedIn that investors should look back at what happened in the UK in 2022: traders sold UK government bonds due to a lack of confidence in then-Prime Minister Liz Truss's economic policies, causing market turmoil. "If the next Federal Reserve Chairman is seen as lacking independence and tries to push down long-term rates, I believe that person will have to resort to quantitative easing to achieve that goal as much as possible," Hooper said. "Lowering the federal funds rate does not guarantee that long-term Treasury yields will also decline; in fact, it may have the opposite effect." Nick Timiraos, known as the "Federal Reserve Echo," commented that Powell's willingness to resist Trump's demands has raised his standing among economists and investors who value the independence of the Federal Reserve. As Hassett competes for the position, he spent months publicly criticizing his future Fed colleagues, and after taking office, he will have to prove his credibility to those colleagues and markets who have diametrically opposed positions to himself, while maintaining the loyalty that got him the job; this is an impossible task. Timiraos added that Hassett's candidacy has raised doubts among some think-tank economists, questioning whether he possesses the composure required for the position and the courage to withstand Trump's pressure; some who had helped him secure support for his nomination as chairman of the Council of Economic Advisers in Congress later expressed concern about his public criticism of the Federal Reserve. A More Divided Federal Reserve Regardless of who ultimately wins the position, they will take over a Federal Reserve where the positions of monetary policy decision-makers have become increasingly divided. The Federal Reserve has internally formed two opposing camps: a hardline hawkish camp and a dovish camp that advocates for further rate cuts. The institution currently has a huge division on whether to continue cutting rates, with dovish officials believing further cuts are necessary to prevent potential continued weakness in the labor market, while hawkish officials are concerned that inflation still poses a significant threatmany of them recently believe that further monetary easing will exacerbate domestic inflation risks. At the upcoming interest rate decision on December 10th, interest rate futures traders currently assign an 88% probability to a rate cut, and in recent weeks, the volatility of probabilities based on interest rate futures trading has been extremely high, with the probability of a rate cut dropping to less than 40% before dovish statements from New York Fed President Williams and other officials. Trump and other U.S. government officials have publicly expressed their preference for significantly lower rates than the current levels, and the President has indicated that rate cuts are the "litmus test" for the next Fed Chairman. In 2026, the lineup of regional Fed Presidents with voting rights on the Federal Open Market Committee (FOMC) monetary policy will lean hawkish, or more inclined to combat inflation and advocate for long-term rate stability.