Economists Favor Waller for Fed Chair, Politics May Sway Pick

The selection of the next Federal Reserve Chair is poised to be a significant pivot point for U.S. monetary policy, with academic economists and political realities diverging sharply on preferred candidates. While a consensus among economists leans towards continuity and independence in leadership, the influence of political considerations, particularly from President Donald Trump, may steer the appointment toward a more compliant figure. This dynamic introduces considerable uncertainty regarding the future direction of interest rates and the Fed’s approach to economic stability.

A poll conducted by the Clark Center for Global Markets at the University of Chicago’s Booth School of Business revealed a pronounced preference among economists for current Fed Governor Chris Waller to succeed Jay Powell. Of the 44 academic respondents, an overwhelming 82% indicated Waller as their ideal choice. However, this academic endorsement is juxtaposed with a considerably lower prediction of his actual appointment, with only 20% believing he will secure the role.

In contrast, Kevin Hassett emerged as the candidate with the strongest perceived likelihood of appointment, favored by 39% of the surveyed economists. This disparity between academic preference and pragmatic prediction highlights the complex interplay of expertise and political maneuvering in high-level government appointments.

President Trump’s influence on the Federal Reserve has been a defining characteristic of his administration, marked by consistent pressure for lower interest rates. His stated objective is to stimulate economic growth and reduce the government’s debt servicing costs, arguing that a rate of 1% would be optimal. This pressure extends beyond policy directives, with Trump having publicly criticized former Chair Janet Yellen and current Chair Jerome Powell.

The Federal Reserve’s decision to lower the benchmark federal funds rate to a range of 4–4.25% represented its first rate cut since December. However, this move was not perceived as sufficiently aggressive by some recent appointees, such as Steve Miran. Miran dissented from the decision and advocated for a more substantial 50 basis point reduction, further suggesting five additional quarter-point cuts by year-end, a stance significantly more hawkish than that of most senior Fed policymakers.

Chris Waller, while generally viewed as more cautious than Miran, also exhibited independent thinking. He was one of two dissenters during a July meeting, voting for a smaller quarter-point cut. His decision not to join Miran’s call for a half-point reduction suggests a measured approach, though perhaps one that some economists believe may hinder his ascent to the chairmanship.

Robert Barbera, an economist at Johns Hopkins University, posited that Waller’s adherence to traditional central banking principles, rather than overt political alignment, might disadvantage him. “Waller looks like a central banker, rather than someone who is prostrating himself for the job of Fed chair,” Barbera commented, implying that such independence might be perceived negatively in the current political climate.

Interestingly, none of the surveyed economists favored Steve Miran as their preferred candidate for chair. Nevertheless, a notable 20% of respondents still identified him as a potential choice for President Trump. Betting markets currently show Chris Waller with a slight advantage over Kevin Hassett in terms of likelihood, yet Hassett is widely considered to possess a stronger political standing.

President Trump has publicly identified his preferred candidates as Waller, Hassett, and former Fed Governor Kevin Warsh, emphasizing that loyalty and a willingness to reduce interest rates are paramount criteria for his selection.

The selection process has been further complicated by actions taken against current Fed Governor Lisa Cook. President Trump’s attempt to remove Cook, citing alleged mortgage fraud, led to a legal challenge by Cook, which could set important precedents regarding the President’s authority over monetary policy appointments.

Treasury Secretary Scott Bessent is leading the initial interview stages for the next Fed Chair. Marc Sumerlin was among the eleven candidates interviewed during the first round, which is anticipated to conclude within two weeks. While Bessent himself was previously considered a strong contender, President Trump indicated a preference for him to remain at the Treasury. Reports from Bloomberg suggest Bessent desires the next chair to implement reforms aimed at restructuring the Fed’s governance and reducing its balance sheet, which has expanded significantly due to quantitative easing measures. The Chicago-Booth poll’s narrowed list of five potential candidates includes Waller, Hassett, Bessent, Warsh, and Miran.

The incoming Federal Reserve Chair will face an economy grappling with the repercussions of trade tariffs, a decelerating labor market, and the persistent risk of stagflation. Most Fed officials anticipate that tariffs will lead to temporary price increases for select goods, and they appear willing to tolerate slower employment growth to mitigate the risk of uncontrolled inflation. However, a growing number of economists now believe stagflation is an increasing possibility. Nikolai Roussanov of the Wharton School noted that the Fed’s dual mandate—maximizing employment and maintaining stable prices—places it in a challenging position, suggesting that historical trends indicate a prioritization of employment over inflation control in recent decades.