Who will succeed Powell?

Introduction: Fed at a Crossroads

On October 22, 2025, the global financial markets are holding their breath in anticipation of a suspense: the term of Jerome Powell, the Chairman of the Federal Reserve (hereinafter referred to as “Fed”), will end on May 15, 2026. This is not only a node of personnel replacement but also a key test of the direction of U.S. monetary policy, global economic stability, and the independence of the Fed. Against the backdrop of the strong return of the Trump administration, the choice of successor, adjustments to interest rate paths, and whether the Fed can continue to withstand political pressure have become the focal points of discussion among the market, scholars, and ordinary investors. As a trader commented on platform X: “Trump's new Fed nominee has already voted for a 50 basis point rate cut… you do the math, the extended cycle is coming.” This statement has ignited the market's expectations and concerns about a radical shift in monetary policy after the end of the “Powell era.”

1. The Powell Era: The Difficult Balancing Act from Anti-Inflation to Soft Landing

Since Jerome Powell was appointed as the Fed chairman by Trump in 2018, he has experienced dramatic fluctuations in the U.S. economy in recent years. From the economic shutdown triggered by the COVID-19 pandemic to the inflation surge in 2021-2022, and then to the gradual cooling from 2023 to 2025, the Fed under Powell's leadership has demonstrated flexibility and decisiveness. His core strategy can be summarized as “data-driven”: curbing inflation through interest rate hikes, followed by cautious rate cuts to protect the job market, while striving to avoid a hard landing for the economy.

1.1 The Legacy of Fighting Inflation

In 2022, faced with the highest inflation rate in 40 years (CPI approaching 9%), the Fed initiated an aggressive rate hike cycle, rapidly raising the federal funds rate from near zero to 5.25%-5.50% by early 2023. This move successfully reduced the core PCE inflation rate from 5.2% in 2022 to 2.9% in August 2025, close to the Fed's 2% target. Powell emphasized in several public speeches that the Fed's dual mandate—price stability and maximum employment—is the core pillar of policy-making.

However, this process does not come without cost. The interest rate hikes have led to a cooling of the real estate market, an increase in commercial real estate (CRE) loan default rates, and heightened pressure on the banking system. For instance, the revised employment data for 2024 indicates that the job growth in the U.S. economy over the past two years has been overestimated by about 1 million jobs, revealing signs of weakness in the labor market. Powell admitted in a speech in October 2025, “The risks we face have not fully disappeared, and the downward pressure on the labor market is exceeding the stickiness of inflation.”

A Cautious Beginning to Interest Rate Cuts 1.2

In September 2025, the Fed initiated a rate cut cycle, lowering the interest rate by 25 basis points to a range of 4.50%-4.75% for the first time, and plans to further cut rates by 25 basis points at the meeting on October 28-29, targeting a range of 3.75%-4.00%. This path reflects Powell's persistent pursuit of a “soft landing”: to alleviate pressure on the labor market while preventing inflation from rebounding due to geopolitical or energy price fluctuations. However, the government shutdown that began on October 1 has hindered the release of key data (such as non-farm payroll and CPI), making the Fed's decision-making feel like “walking in the dark.”

1.3 Powell's Declaration of Independence

Against the backdrop of increasing political pressure, Powell has consistently emphasized the independence of the Fed. In September 2025, he stated clearly: “Political factors are not within our consideration. We formulate policies based on data and economic outlook.” This position is a direct response to the open criticism from the Trump administration. Trump has repeatedly attacked Powell for keeping interest rates at a “too high” level, calling him a “dummy,” and implying that he would push for a more “compliant” Fed chair to take office.

However, Powell has less than 8 months left in his term as Fed Chairman, while his term as a governor will last until January 2028. This means that even if he no longer serves as Chairman, he may still influence policy in his role as a governor. However, the Trump team is clearly not satisfied with this arrangement, and the choice of his successor has become a key move in their effort to reshape the Fed.

2. The Contest of Successors: Trump's “Fed Reform Plan”

As Powell's term enters the countdown, the Trump administration is accelerating its layout, attempting to steer the Fed's policy direction towards a path more aligned with its economic agenda through the appointment of a new chair and directors. The selection team led by Treasury Secretary Scott Bessent has narrowed down about 5 frontrunners from 11 candidates and plans to submit a final list of 3-4 to Trump after Thanksgiving, with the nomination process possibly starting in January 2026. Below is an analysis of the main candidates:

2.1 Popular Candidates and Their Policy Tendencies

2.2 Trump's “Fed overhaul” logic

The succession strategy of the Trump administration is clear: by nominating candidates loyal to his economic vision, it gradually transforms the Fed into a tool that supports the “America First” policy. The backgrounds of Hassett and Milan are particularly prominent, as their close ties to the White House and tendency towards loose policies align closely with Trump's calls for lower interest rates and economic stimulus. Market sentiment on platform X reflects this expectation, with one user stating: “The 50 basis point rate cut vote by the new director Milan is just the beginning. Trump wants a 'MAGA Fed.'”

However, this strategy is not without resistance. The legal framework of the Fed grants it a high degree of independence, and the appointment of the chair and board members requires Senate confirmation. The Trump team's attempt to challenge the legitimacy of existing board members (such as Lisa Cook) in court has been dismissed by lower courts, and the Supreme Court will hear the case in January 2026. Additionally, concerns in the market about overly aggressive easing policies potentially leading to uncontrolled inflation are intensifying, especially against the backdrop of Trump's plans to implement high tariffs (which are expected to raise CPI by 0.5-1%).

2.3 Market and Academic Reactions

The optimism for Hasset in prediction markets (such as Kalshi) at a 48% probability reflects investors' expectations of Trump's rising influence, but the robust image of Waller and Bowman has also won support from some institutional investors. Economists are concerned that a too “politicized” Fed could undermine its credibility, leading to a weaker dollar and risks of asset bubbles. On platform X, an analyst commented: “Ending quantitative tightening (QT) + significant interest rate cuts = a wave of liquidity. It's a feast for Bitcoin, but a nightmare for savers.”

3. The Fog of Interest Rate Path: From Cautious Rate Cuts to Potential Waves of Easing

The Fed's monetary policy is at a critical turning point. The interest rate cut cycle for 2025 has already begun, but the uncertainty of the future path is exacerbated by government shutdowns, tariff shocks, and successor preferences. Here is an analysis of the interest rate path:

3.1 Current baseline: gradual rate cuts

According to the latest survey by Reuters, the market generally expects two 25 basis point rate cuts in 2025, with the federal funds rate expected to drop to around 3.25% by the end of 2026, close to the neutral rate level. Powell stated in a recent speech that current policy remains restrictive (with real rates above the neutral rate), but the downside risks in the job market have prompted the Fed to accelerate its easing pace. The meeting on October 28-29 is expected to cut rates by another 25 basis points, with a potential further cut of 25 basis points in December, totaling a 50 basis point cut in 2025.

However, the government shutdown has led to the absence of key data, making decision-making fraught with uncertainty. For example, the September CPI data will be released on October 24, but the non-farm payroll report has been delayed, forcing the Fed to rely more on market signals and unofficial data. Powell admitted, “We do not have a risk-free path and must find a balance between employment and inflation.”

3.2 Dovish Pressure: Moving Towards a Wave of Easing?

The new board member appointed by Trump, Stephen Moore, supported a 50 basis point rate cut at the September meeting, advocating for a cumulative reduction of 125 basis points by the end of 2025, bringing rates down to an ultra-low level of 2.75%-3.00%. This aggressive stance aligns with Trump's calls for low interest rates and may pave the way for addressing tariff shocks and stimulating economic growth. Traders on platform X are thrilled, stating, “After Powell leaves, the Fed will enter QE mode, and liquidity will flood the market.”

The end of Quantitative Tightening (QT) has also become a focal point of discussion. Powell hinted that the reserves in the banking system are “over-adequate,” but liquidity is “gradually tightening.” The market interprets this as the Fed possibly halting QT in early 2026, or even restarting Quantitative Easing (QE) to address economic fluctuations caused by tariffs. This expectation has driven up the prices of hard assets such as gold and Bitcoin, while also raising concerns about the devaluation of the dollar.

3.3 Risks and Challenges

Radical interest rate cuts come with a price. The tariff policy proposed by Trump (imposing a 10-20% tariff on imported goods) could push up inflation, offsetting the stimulative effects of the rate cuts. Energy prices are volatile due to geopolitical tensions (such as the situation in the Middle East), which also poses a risk for inflation rebound. Hawks within the Fed (such as Waller) advocate for cautious rate cuts, warning that too rapid easing could lead to asset bubbles and a weakening dollar. Furthermore, the rising default rate on commercial real estate loans and potential risks within the banking system also require the Fed to maintain regulatory vigilance while easing.

IV. The Test of Independence: The Soul Battle of the Fed

The independence of the Fed is the cornerstone of its century-old history, but the strong intervention of the Trump administration is posing unprecedented challenges to it. The last few months of Powell's term will serve as a touchstone to test whether the Fed can maintain its policy autonomy.

4.1 The Tug of War Between Law and Politics

The legal framework of the Fed clearly stipulates that the appointment and removal of the chair and members must be approved by the Senate, and they cannot be arbitrarily replaced due to policy differences. The Trump team attempted to challenge the legitimacy of the current board members in court (such as the Lisa Cook case), but lower courts have dismissed the relevant claims, and the Supreme Court's ruling (January 2026) will become a critical juncture. Powell himself has also made it clear that even if he no longer serves as chair, he will continue to fulfill his duties as a member until 2028, which retains a certain degree of policy continuity within the Fed.

4.2 Trump's Long-Term Impact

Even if Trump cannot directly replace Powell, his strategy of gradually “transforming” the Fed through newly appointed chairs and governors may have more far-reaching effects. The rise of candidates like Hassett and Milan could shift the Fed's policy focus from a dual mandate to a more singular growth orientation. This change may boost the stock market and cryptocurrencies in the short term, but long-term risks include uncontrolled inflation, dollar devaluation, and instability in international capital flows.

4.3 Global Perspective: Fed's Role

The Fed's policies not only affect the U.S. economy but also have far-reaching impacts on global markets. In 2025, the global economy faces multiple challenges: sluggish growth in the Eurozone, a persistently depressed real estate market in China, and rising debt pressures in emerging markets. The Fed's interest rate cuts and potential QE could provide breathing room for global liquidity, but if policies are too loose, it may trigger currency depreciation and capital outflows in emerging markets. The International Monetary Fund (IMF) recently warned that if the Fed's independence is compromised, it could undermine global confidence in the dollar system.

V. Conclusion: The suspense remains, the game continues

The suspense surrounding Powell's term ending is not just about a personnel change; it is also a game regarding the future direction of the Fed. The choice of his successor will determine whether monetary policy continues Powell's cautious balance or shifts towards the aggressive easing anticipated by Trump. The fog surrounding the interest rate path, the potential impact of tariff shocks, and the test of the Fed's independence together constitute the core of this high-risk game.

Market expectations for 2025-2026 have already diverged: optimists envision an asset boom fueled by a wave of liquidity, while pessimists worry about inflation rebound and a dollar crisis. The heated discussions on platform X reflect this divide: “After Powell, the Fed will either become an engine of growth or ignite an inflation bomb.” For investors, hard assets like gold and Bitcoin may be a choice to hedge against uncertainty; for the general public, fluctuations in the cost of living will become a more immediate test.

In the coming months, the September CPI data (to be released on October 24), the results of the October FOMC meeting, and the nomination progress of Trump's team will provide more clues for this game. Regardless of the outcome, the soul battle of the Fed has begun, and its conclusion will profoundly shape the future of the American and even the global economy.