Trump’s Next Fed Pick Could Make Powell Irrelevant Overnight

Trump’s Moves Signal Rapid Decline in Fed Chair Powell’s Influence as “Phantom Fed Chair” Looms

Federal Reserve Chair Jerome Powell may still have more than a year left in his term, but political and market dynamics are already threatening to sideline him long before his official exit date in May 2026.

Former President Donald Trump — now returning to the political spotlight — has wasted no time reshaping the central bank’s leadership, openly floating potential successors, and ramping up public criticism of Powell’s handling of interest rates. Economists and market analysts say the strategy could create what some are calling a “Phantom Fed Chair” scenario, effectively rendering Powell a lame duck well in advance of his departure.

The “Phantom Fed Chair” Effect Explained

The concept, popularized this week by financial commentary outlet The Kobeissi Letter, is rooted in a simple but potent market reality: once investors know who the next Fed Chair will be, attention shifts almost overnight.

“The moment Trump names a successor, Powell’s influence could drop by 90 percent,” Kobeissi warned in a post on X, suggesting that markets would treat the incoming leader’s views as far more relevant to future policy than the outgoing chair’s.

Source: X

In monetary policy terms, this is significant. Much of a Fed Chair’s power lies in forward guidance — the ability to shape expectations about future interest rates and economic conditions. If markets start ignoring Powell in favor of a future Trump appointee, his ability to steer the economy could be dramatically weakened.

As one Wall Street strategist put it, “It’s like when a substitute teacher walks in and the class knows the permanent teacher is on their way — attention drifts.”

Trump’s First Major Appointment: Stephen Miran

Trump’s early moves are already signaling a shift in the Fed’s ideological balance. This week, he nominated Stephen Miran, head of the Council of Economic Advisors, to the Federal Reserve Board of Governors. Miran will serve out the remainder of a term vacated by Adriana Kugler, who resigned unexpectedly, ending January 31, 2026.

Source: X

Miran is known for favoring looser monetary policy to stimulate growth and for being open to integrating digital assets — including Bitcoin and Ethereum — into the broader financial system. His addition to the Board suggests Trump is looking to build a Fed leadership team aligned with his economic vision: one that prioritizes economic expansion, deregulation, and an openness to emerging technologies.

Analysts say this is a subtle but meaningful departure from Powell’s more cautious, inflation-focused approach. “The Fed is about to get younger, more politically assertive, and potentially more market-friendly — especially toward risk assets like crypto,” one investment bank’s research note observed.

Shortlist for the Top Job

Trump has not been coy about his intentions for the Fed’s top spot. He has publicly stated that the list is “down to two Kevins and two others,” widely believed to be:

• Kevin Hassett – Former White House economic adviser with strong pro-growth views.

• Kevin Warsh – Former Fed Governor known for hawkish inflation stances and deep Wall Street ties.

• Christopher Waller – Current Fed Governor, considered a conservative voice within the central bank.

• Larry Kudlow – Trump’s former top economic adviser and long-time economic commentator.

Some insiders also speculate that Scott Bessent, a billionaire investor and Trump ally, could be in the mix for either the chairmanship or another top financial role.

If Trump signals his choice early — as some believe he will — markets could recalibrate almost immediately, factoring in the new leader’s likely stance on interest rates, quantitative easing, and digital asset regulation.

Public Criticism Turns Up the Heat

Trump’s policy maneuvers have been accompanied by increasingly sharp attacks on Powell’s leadership. He has labeled the Fed Chair “too political” and “too late” on rate cuts — a pointed reference to the Fed’s decision to hold its benchmark rate steady at 4.50% during the July 30 Federal Open Market Committee (FOMC) meeting.

That meeting produced a rare split decision, with two dissenting votes — the most divided outcome in more than 30 years. Powell defended the decision, saying the Fed will only lower rates once inflation shows a clear and sustained decline.

“The central bank’s credibility depends on its independence,” Powell told reporters, in what many interpreted as a veiled rebuttal to political pressure.

Why This Matters for Markets

For traders and investors, the stakes are high. A Trump-aligned successor is widely expected to push for earlier rate cuts, potentially weakening the U.S. dollar, boosting equity markets, and providing a tailwind for cryptocurrencies.

Already, futures markets are pricing in the possibility of a policy shift in mid-to-late 2025 — months before Powell’s term ends. Some traders have even begun discounting Powell’s guidance in favor of anticipating how a future chair might act.

“That’s the danger of the ‘Phantom Chair’ phenomenon,” said one senior bond trader. “Markets don’t wait for the paperwork to be signed. The shift in expectations happens instantly.”

A Fed at a Crossroads

The current dynamic is unprecedented in modern Fed history. While incoming administrations have often signaled their preferred direction for monetary policy, rarely has a sitting Fed Chair faced such open political maneuvering with so much time left in their term.

Source: X

The Federal Reserve’s independence is designed to insulate it from exactly this kind of pressure, but the reality is that financial markets — not legal structures — often determine whose voice carries weight.

As a result, the coming months could see a weakening of Powell’s market influence even if his actual decision-making authority remains intact.

Broader Implications Beyond Interest Rates

The Fed Chair transition will have ripple effects beyond the cost of borrowing. A leadership change could influence:

• Regulation of digital assets — Miran’s appointment and Trump’s pro-crypto rhetoric suggest a friendlier stance toward cryptocurrency markets.

• Banking supervision — A more deregulatory approach could ease compliance burdens for financial institutions.

• Global monetary diplomacy — A shift in Fed leadership could alter the U.S. position in international forums like the G20 and IMF.

Looking Ahead

For now, Powell continues to lead the central bank’s deliberations, and Fed officials have emphasized that policy decisions will remain data-dependent. Inflation trends, employment figures, and global economic conditions will dictate the path forward.

But in political and market terms, the clock is ticking. If Trump announces his preferred successor in the coming months, the “Phantom Fed Chair” could become a reality — reshaping expectations and sidelining Powell’s influence well before 2026.

In the high-stakes world of central banking, perception is often as powerful as policy. Powell’s challenge now is to keep markets listening, even as political forces try to turn the page early.

Writer @Erlin

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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