President Donald Trump wants to lower interest rates to approximately zero, a change that could goose the economy in the short term but in the long term would lead to roaring inflation. Federal Reserve Chairman Jerome Powell won't do that, and so Trump has been clearly communicating his dissatisfaction with Powell. And while Trump says he's "highly unlikely" to fire the man, that isn't a definite no—and Powell's term expires next May, so we're bound to see someone new in the job soon either way.
The names being kicked around for Powell's replacement include National Economic Council Director Kevin Hassett, financier and Stanford lecturer Kevin Warsh, Federal Reserve Governor Christopher Waller, and Independent Institute Senior Fellow Judy Shelton. Right now the smart money is on Hassett, a policy wonk who has held various positions in Washington, D.C., for 25 years. Hassett can be something of a Trump hack: He is constantly going on TV to defend the president's policies, however inane they might be. But he has also said all the right things about Fed independence, and he seems to be sincere about that.
Hassett believes that rates should be perhaps 1 percent to 1.5 percent lower. This would take monetary policy from a more restrictive stance to something approaching neutral. It is unlikely, given current economic conditions, that Hassett would be willing to lower rates below that, and at some point that would probably prompt another conflict with Trump.
