The Federal Reserve is bracing for a potential leadership change when Jerome Powell’s term expires in May 2026. A recent CNBC survey found that Treasury Secretary Scott Bessent, former Fed Governor Kevin Warsh, and National Economic Council Director Kevin Hassett are the top contenders to succeed Powell as Fed Chair.
The probability of a recession in the next year has decreased to 31% from 38% in June and 53% in May after President Trump announced sharply higher tariffs. However, respondents believe unemployment will rise slightly this year but remain stable by 2026.
A virtual three-way tie exists among the candidates, with 24% of respondents choosing Bessent, 24% Warsh, and 22% Hassett. Trump has repeatedly called for Powell’s resignation, citing his slow response to interest rate cuts, and has considered firing him.
Despite President Trump’s criticism of the Fed’s monetary policy, he now suggests not firing Powell before his term ends in May. Powell’s term as Chair concludes in May 2026, but he can stay on as Governor until 2028.
In the survey, 84% said the president would not fire Powell before his term ends. Economists expressed concerns that the Fed’s independence has been compromised, which may elevate long-term interest rates and weaken the dollar.
The president’s pressure on the Fed to cut interest rates is believed by some respondents to have the opposite effect. While 56% say it has no impact on policy, 42% believe it makes rate cuts less likely.
Respondents forecast two rate cuts in September and before year-end, which would bring the funds rate down to around 3.9%. Further cuts are expected for 2026, with an average respondent putting the funds rate at 3.5%.
Tariff uncertainty remains the top threat to the expansion, followed by overall uncertainty about the president’s policies. However, some respondents believe that Trumpian uncertainties on the economy and policies are settling down, which is positive for equities.
The probability of a recession has decreased, with GDP forecasted to rise 1.4% this year and an average 2.2% in 2026. The labor market is expected to remain stable, but respondents are cautious about employment and housing issues.
Despite the overall positive economic outlook, respondents are concerned about the stock market this year, with a low forecast for the S&P 500 at year-end (6,344) and a 9% increase predicted next year.
Source: https://www.cnbc.com/2025/07/29/bessent-warsh-hassett-are-the-leading-contenders-to-get-fed-chair-job-cnbc-survey-finds.html