Trump's Pressure on Fed 'Backfires,' Hawkish Candidate Warsh Overtakes Hassett

BlockBeats News, January 15th. After the US Department of Justice launched an investigation into Federal Reserve Chairman Powell, the situation shifted in the opposite direction of what Trump had hoped for. The probability of Powell staying on as chair until 2028 when his term ends in May has started to rise, and the odds of the next chair, a more hawkish candidate, Kevin Warsh, overtaking Hasset have increased. Trump may find himself in a game of wits with the Fed throughout the year.

Polymarket data shows that shortly after Powell's video response to the investigation on January 11th, the probability of him leaving the Fed board by the end of May or by the end of the year plummeted. Currently, investors believe the likelihood of Powell leaving the Fed by May 30th has dropped from 74% earlier this month to 45%, and the probability of his departure by the end of the year has slid from 85% to 62%.

The prediction market has also adjusted its expectations for Trump ally Kevin Hassett's nomination as the next Fed chair. With the news of the DOJ investigation spreading, Kevin Warsh, a more hawkish figure in the Fed chair candidate list, has gained more support on Polymarket, surpassing Hassett.

Policy analyst Dan Clifton stated that since last summer, there has been an informal agreement between Trump and Powell—if Powell agrees to leave the Fed when his term ends in May this year, Trump will no longer oppose the billions of dollars renovation project at the Fed headquarters. Trump had previously strongly criticized this renovation plan, but in the latter half of last year, his criticism of the Fed diminished. This bottom line was broken last Sunday, making it more likely for Powell to stay on as a regular board member at the Fed. Continuously attacking Powell personally may ultimately be a fruitless effort.