2025-10-13
Fed Chair Candidate List Narrowed: Market Reactions and Future Policy Outlook
Recently, U.S. Treasury Secretary Besent significantly narrowed the list of Federal Reserve Chair candidates from 11 to 5, signaling an accelerated decision-making process. The shortlist includes current Fed officials, former board members, and seasoned Wall Street investors—namely Vice Chair Bowman, Governor Waller, National Economic Council Director Hassett, former Fed Governor Walsh, and BlackRock’s Chief Investment Officer for Fixed Income, Reed. This move has drawn market attention to the Fed’s potential policy direction, particularly as the central bank continues to signal a dovish stance, with markets pricing in a 98.3% probability of a 25 bps rate cut next month. Chairman Powell’s term will end in May 2026, and the final nomination is expected by spring next year, serving as a key indicator of the Fed’s policy outlook over the next six months.
The candidates present a diverse mix of backgrounds, including current Fed officials Bowman (Vice Chair for Supervision) and Waller (Governor), former Governor Walsh, as well as administrative and investment figures such as Hassett (NEC Director) and Reed (BlackRock Fixed Income CIO). Market views on the rate-cut path are increasingly divided: dovish candidates like Waller and Hassett advocate a more aggressive easing approach, with total cuts possibly exceeding 100 bps for the year; in contrast, hawkish candidate Walsh prefers a slower pace, emphasizing inflation stability and keeping the federal funds rate above 4%. According to CME FedWatch data, the probability of a 25 bps rate cut in November exceeds 90%, while the chance of another cut in December is above 60%, reflecting broad expectations of faster monetary easing. Meanwhile, signs of labor market weakness persist—consumer confidence fell to 55.1 in September, the lowest since May, marking a 21.4% YoY decline.
The reduction of the candidate list indicates that the Fed’s policy transition is entering a decisive phase. In the short term (1–2 months), markets are likely to focus on the November FOMC meeting and the upcoming nonfarm payroll report. Expectations of rate cuts should continue to support liquidity and risk assets, though a weaker dollar could heighten global uncertainty. In the medium term (within six months), if dovish candidates prevail, rate cuts could be deeper and more frequent, sustaining the bull market in equities and risk assets but also increasing the risk of inflation rebound. Conversely, a hawkish outcome would imply a more cautious policy stance, strengthening the dollar, boosting demand for safe-haven assets, and increasing market volatility. Overall, the Fed Chair nomination remains one of the most critical sources of uncertainty for global markets in the coming half-year, and investors should closely monitor each candidate’s policy philosophy and potential influence on monetary direction.