Federal Reserve Chair Jerome Powell is facing a new challenge as President Donald Trump considers installing a “shadow chair” to undermine his authority. Trump has a list of potential candidates, including Treasury Secretary Scott Bessent, National Economic Council Director Kevin Hassett, and former Fed Governor Kevin Warsh.
A report suggests that Trump may name the successor sooner than expected in an attempt to influence interest rate policy. This move could be problematic as there are no immediate open positions, and Powell’s term as governor doesn’t expire until 2028. If Trump installs a shadow chair, it could politicize the Fed for several months before stability is restored next May.
The news has impacted markets, with traders accelerating bets on rate cuts this year. The dollar also fell sharply against its global counterparts. However, Chicago Fed President Austan Goolsbee stated that the political waves have no effect on decision-making and would not affect the FOMC’s decisions.
The potential move by Trump to install a shadow chair has raised concerns about the Fed’s independence and stability. This comes during a busy time for the central bank, which has recently taken steps aimed at banking, including relaxing reserve capital rules for systemically important banks.
Source: https://www.cnbc.com/2025/06/26/trumps-war-against-the-powell-fed-has-taken-another-political-turn.html