Advance intervention decisions! Trump is likely to "appoint" the "new chairman of the Federal Reserve" at the end of the year, who may participate in the interest rate decisions in March and April next year

U.S. President Donald Trump is accelerating the process of selecting the next Federal Reserve Chair, planning to finalize the candidate by the end of this year. This timeline, which far exceeds the norm, may allow the White House to exert influence over monetary policy ahead of schedule.

Trump revealed on Monday that he might announce his choice to succeed current Federal Reserve Chair Jerome Powell, whose term expires in May next year, by the end of the year. He is currently selecting from five final candidates. U.S. Treasury Secretary Steven Mnuchin plans to conduct a second round of interviews with the five candidates on the final list next month, after which he will submit a more streamlined nomination list to the president for final decision.

The five candidates include two current Federal Reserve governors, Christopher Waller and Michelle Bowman, White House National Economic Council Director Kevin Hassett, former Federal Reserve governor Kevin Warsh, and BlackRock executive Rick Rieder. Among them, Hassett and Warsh are widely seen as the frontrunners.

Nick Timiraos, a reporter for The Wall Street Journal, known as the "new Federal Reserve correspondent," analyzed that the Federal Reserve Chair candidate chosen by Trump is likely to fill the position currently held by Stephen Miran. Miran's term will end in January next year, but he can remain in office until the Senate confirms a successor. This would allow Trump to arrange for the future Federal Reserve Chair to participate in the rate-setting meetings in March and April before the new chair officially takes office in mid-May, thereby allowing the new chair to start influencing the direction of monetary policy before formally taking charge of the Federal Reserve.

The Federal Reserve cut interest rates by 25 basis points in September, with Miran voting against it, advocating for a 50 basis point cut. The market widely expects the Federal Reserve to cut rates again by 25 basis points at the conclusion of its two-day meeting ending this Wednesday.

Five Candidates Emerge

U.S. Treasury Secretary Steven Mnuchin confirmed to the media on Monday that the final five candidates have been determined. Among them are two current Federal Reserve governors—Christopher Waller and Michelle Bowman, who also serves as Vice Chair for Bank Supervision, both initially nominated by Trump.

Of the other three candidates, two are widely regarded as frontrunners: White House National Economic Council Director Kevin Hassett and former Federal Reserve governor Kevin Warsh, who was nominated by former President George W. Bush.

Timiraos mentioned in his report that these two candidates have established the closest relationships with Trump, which is seen as a key factor in winning the nomination. The fifth candidate on the list is BlackRock executive Rick Rieder, who oversees the company's massive bond business and made a strong impression during his initial meeting with Mnuchin this summer.

Timiraos stated that although Treasury Secretary Mnuchin is in charge of the selection process, Trump reiterated on Monday that Mnuchin himself is not among the candidates. However, according to those who have communicated with Mnuchin, if Trump is dissatisfied with other options, Mnuchin could still become the final choice

Early Appointment: Pros and Cons

Historically, the White House typically announces the new Federal Reserve Chair nominee three to four months before the current chair's term expires. An early announcement allows the incoming chair to influence investors' expectations regarding the interest rate path.

Timiraos analyzes that the Federal Reserve Chair nominee selected by Trump is likely to fill the board seat currently held by Miran. Miran's term will end in January next year, but he can remain in office until the Senate confirms his successor. This would enable Trump to allow the future Federal Reserve Chair to have voting rights in the interest rate decision meetings in March and April, ahead of the new chair's official term starting in mid-May.

This arrangement means that the new chair may begin participating in monetary policy decisions two months before officially taking charge of the Federal Reserve, providing a institutionalized channel for early involvement in policy direction.

On the other hand, an early announcement could also have negative consequences. Timiraos states that this may put Powell's successor in an awkward position—either publicly challenging the decisions of future colleagues or defending the actions of the Federal Reserve, thereby angering Trump. While interest rate decisions are guided and influenced by the chair, they must receive broader committee approval