Kevin Hassett has emerged as the clear frontrunner to replace Jerome Powell as Federal Reserve chair next May, a shift that could reshape U.S. monetary policy and affect global markets, particularly if Hassett brings a more dovish stance as expected.
A Bloomberg report earlier this week sent predictive betting markets into a frenzy, with Polymarket odds of Hassett becoming the next Fed chair jumping from 25% to 57%.
That puts him well ahead of Fed Governor Christopher Waller, the second-most-likely contender at 26%, who has consistently voted for rate cuts since diverging from the broader Fed board view last July.
While the White House has called the discussion speculative, Hassett’s rise is unmistakable—and investors are already taking notice.
What Hassett Thinks About Tariffs and Inflation
Hassett, currently serving as Director of the National Economic Council, has challenged conventional Wall Street narratives on inflation, particularly regarding Donald Trump's tariff policies.
In a recent Bloomberg interview, he cited a San Francisco Federal Reserve paper that reviewed a century of trade policy and concluded tariffs tend to have a deflationary—not inflationary—impact.
“Wall Street has been quite wrong on their forecasts of inflation surge, which did not happen,” Hassett said.
“We’re on track to hit 2.9% or 3% [core PCE inflation] at the end of this year.” The PCE, or Personal Consumption Expenditures Price Index, is the Fed’s preferred inflation gauge.
Hassett supports the idea that tariffs act as a demand-side shock, cooling spending and thus price growth—an argument that dovetails with his broader reputation as a proponent of looser monetary policy.
How Markets Could React To A Hassett Appointment
Tiffany Wilding, economist at Pacific Investment Management Co., said Hassett is perceived as the candidate most aligned with the Trump administration's views on interest rates.
"He's clearly more dovish than the consensus on the committee right now," Wilding said in a recent interview, noting that while Powell's term as chair ends in May 2026, Trump could install Hassett sooner through the expiring Steve Miran seat as early as January 2026.
But even if appointed, Hassett would need to convince other members of the Federal Open Market Committee (FOMC) to support any aggressive push for rate cuts.
"The committee is a democratic process," Wilding said. "He will have to have some intellectual heft in terms of convincing the others on the committee."
According to Wilding it is no guarantee that Powell will leave the Fed board after stepping down as Chairman in May.
She warned that Fed efforts to push rates too low, too fast, could raise concerns about the long-term credibility, potentially steepening the yield curve if long-dated Treasury yields rise on inflation fears.
Matthew Ryan, head of market strategy at Ebury, said the news may trigger a further decline in the U.S. dollar.
"Hassett is widely regarded as the most dovish candidate currently in the running… having previously voiced a preference for a much lower fed funds rate," Ryan said.
Though the dollar’s move has been "relatively contained so far," he warned that it could accelerate as Powell's departure date draws closer.
David Morrison, senior market analyst at Trade Nation, added that Hassett's dovish views could support further monetary easing, something that may concern bond investors wary of reaccelerating inflation.
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