In an August post on Truth Social, President Trump lashed out at his first-term Treasury secretary, Steven Mnuchin, for advising him to select Jerome H. Powell as chair of the Federal Reserve in 2017.
Mr. Trump, who had spent months fuming that Mr. Powell was not cutting interest rates quickly enough, wrote: “Steve ‘Manouychin’ really gave me a ‘beauty’ when he pushed this loser. The damage he has done by always being Too Late is incalculable.”
The sharp criticism of one of Mr. Trump’s most loyal first-term cabinet members came as the president’s current Treasury secretary, Scott Bessent, was preparing to find a successor for Mr. Powell, whose term as chair expires next year.
The stakes for the next Fed chair will be high. Mr. Trump has made no secret that he expects his pick to swiftly cut rates. But the selection is also putting Mr. Bessent in an unusually uncomfortable spot, with Mr. Trump making clear that his Treasury secretary’s fortunes are tightly tied to what the Fed does next.
At a speech in Washington last month, Mr. Trump joked that he was disappointed that Mr. Bessent was failing to sway Mr. Powell on interest rates.
“The only thing Scott is blowing it on is the Fed,” the president said during remarks at a Saudi investment forum. “If you don’t get it fixed fast, I’m going to fire your ass.”
Mr. Trump is expected to announce his pick to be the next Fed chair soon. At a cabinet meeting on Tuesday, he said it could come “early next year.”
Although the final decision will be Mr. Trump’s to make, the pressure is now on Mr. Bessent to steer through a candidate who will be the monetary policy dove that Mr. Trump desires.
Mr. Bessent, who is speaking at the New York Times DealBook conference on Wednesday, has curried favor with Mr. Trump by calming markets in the face of global trade fights and bashing liberal policies. The president has lavished praise on Mr. Bessent, even saying he would like to see his Treasury secretary lead the Fed. But if Mr. Trump’s Fed pick struggles to push through much lower interest rates or proves to be less than compliant with the White House’s wishes than expected, Mr. Bessent could bear the blame.
“Other than a Supreme Court justice, this is the most important pick a president makes,” said Stephen Moore, a former economic adviser to Mr. Trump. He said the president was “obsessed” with not choosing someone he would later regret.
Mr. Trump nominated Mr. Moore to the Fed in 2019, but he was forced to withdraw because of a lack of support in the Senate. Although Mr. Bessent has insisted that he does not want to leave the Treasury role, Mr. Moore believes that there is still a chance Mr. Trump could tap him to lead the Fed.
“I think Trump has really come to trust Bessent and puts a lot of weight on his judgment,” Mr. Moore said.
Mr. Trump said this weekend that he had made his selection among a field of five finalists but was not prepared to announce it. Most indications point to Kevin A. Hassett, director of the National Economic Council, as the president’s pick, although nothing is final until an announcement has been made. On Tuesday afternoon, Mr. Trump referred to Mr. Hassett as a “potential Fed chair,” after saying earlier in the day that he had whittled the list down to one candidate.
“Hassett has a tenure of loyalty,” said Mark Spindel, the chief investment officer at Potomac River Capital and a co-author of a book on central bank independence.
“He possesses a unique ability to simultaneously translate in both directions — Trumpian gobbledygook into strong, coherent economics,” Mr. Spindel said. “And, he can take strong, coherent economics and translate it into Trumpian gobbledygook.”
Others on the shortlist included Kevin M. Warsh, a former Fed governor; Christopher J. Waller, a sitting governor; and Rick Rieder of BlackRock. At one point, there were 11 potential candidates, reflecting what Mr. Bessent has sought to convey as a rigorous search.
Mr. Trump has made clear that he wants a Fed chair who will support substantially lower interest rates, something that the central bank under Mr. Powell’s leadership has rebuffed given the economic backdrop. Inflation has picked back up with Mr. Trump’s tariffs, while the labor market has shown signs of slowing.
That has prompted officials at the central bank to opt for only a handful of cuts, with interest rates now in a range of 3.75 percent to 4 percent. Many policymakers appear skeptical about how much more relief they can provide to borrowers, likely limiting how much interest rates will fall next year.
That caution has outraged the president, who has unleashed one of the most intense pressure campaigns against the central bank in modern history. In an effort to wrest more control over the institution — and, in turn, its interest rate lever — Mr. Trump has sought to reshape the top ranks and appoint loyalists to the Fed.
The president installed Stephen I. Miran, one of his top economic advisers, to fill a four-month term that unexpectedly opened up after another governor, Adriana D. Kugler, stepped down early from her role. Mr. Trump tried to force another opening on the board of governors, seeking to fire Lisa D. Cook over allegations that she committed mortgage fraud. The Supreme Court recently ruled that Ms. Cook could stay at the Fed as litigation continued. Mr. Trump has also repeatedly toyed with firing Mr. Powell, saying as recently as last month that he would love to do so.
The leading contenders for the top job have taken note of the president’s demands. As part of a lengthy public audition that has spanned months, they have espoused their support for lower interest rates and outlined the ways in which they would overhaul the Fed. Mr. Hassett as recently as Sunday trumpeted his aptitude to get borrowing costs down, citing a shift down in long-term Treasury yields after he was floated as the front-runner.
“I think that the American people could expect President Trump to pick somebody who’s going to help them have cheaper car loans and easier access to mortgages at lower rates,” Mr. Hassett told CBS News. “That’s what we saw in the market response to the rumor about me.”
But Mr. Hassett is likely to face resistance if he pushes hard for substantially lower interest rates than the economic backdrop calls for, as other officials at the central bank will also vote on policy decisions. Resistance could also come from Wall Street investors, who may start to question the Fed’s commitment to keeping inflation under control and consider shedding U.S. Treasury bonds, leading to higher borrowing costs at a time when the government is issuing a lot of debt to cover expenditures.
“Nobody can afford a bond market meltdown,” Mr. Spindel said. “That is ever-present in Bessent’s approach to policy.”
Regardless of whom Mr. Trump picks, he will most likely rely on Mr. Bessent to keep a close watch on the next Fed chair. The Treasury secretary and the Fed chair traditionally dine weekly to discuss the state of the economy.
But Mr. Bessent has already shown a willingness to stray from other traditions of most Treasury secretaries, who have tended to avoid publicly weighing in on monetary policy. Earlier this year he suggested that Fed officials were making decisions based on politics and that they had “tariff derangement syndrome.”
He has called for a sweeping overhaul of the institution, having accused its staff of “mission creep.” Mr. Hassett, or any candidate who gets the job, is expected to pursue such changes once installed.
Alan Rappeport is an economic policy reporter for The Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
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