President Donald Trump is considering naming a “shadow chair” until the current Federal Reserve Chairman, Jerome Powell, leaves office next year, in an attempt to pressure the Fed into cutting rates. The idea has raised concerns about credibility and independence for the central bank.
A shadow chair would be a temporary position that would undermine Powell’s authority and allow Trump to exert more influence over monetary policy decisions. However, finding a suitable candidate for such a role might be challenging due to reputational risks.
Central bank experts acknowledge some benefits to nominating a new Fed chair early, but argue that the current situation is unprecedented and could unsettle markets. The Fed has traditionally maintained its independence, and veering outside this tradition would pose significant questions about the credibility of the next chair.
The idea also raises concerns about inflation fears and Treasury yields. Rate cuts on Trump’s scale could stoke inflation fears and send Treasury yields higher again. Markets might react unpredictably to such a scenario, making it challenging for the Fed to shape rate expectations.
With only one upcoming vacancy on the Federal Reserve Board of Governors, Trump has limited options for naming a shadow chair. The next Fed chair would need to navigate complex logistics, including finding a candidate who can effectively serve as an alternative voice on monetary policy without compromising their own credibility.
Source: https://www.cnbc.com/2025/07/09/trumps-next-fed-chair-pick-already-comes-with-a-credibility-problem.html