Trump hesitates on picking Kevin Hassett for Fed chair, rattling markets

President Donald Trump said Friday he’s having second thoughts about picking Kevin Hassett to lead the Federal Reserve, worried about losing one of his top economic spokesmen at the White House.

Trump made the comments during a healthcare event at White House while speaking directly to Hassett, who runs the National Economic Council and has been considered a frontrunner to replace Jerome Powell.

“I actually want to keep you where you are, if you want to know the truth,” Trump told Hassett. “If I move him, these Fed guys, certainly the one we have now, they don’t talk much. I would lose you. It’s a serious concern to me.”

The dollar bounced back from earlier lows after Trump spoke, while stocks turned negative.

Markets shifted after Trump’s comments, with government bonds selling off as investors lowered their expectations for how many times the Fed will cut rates in 2026. The two-year Treasury yield climbed five basis points to hit 3.61%, marking its highest point since the Federal Reserve’s last rate reduction in December.

Trading in short-term rate futures showed investors betting on fewer chances of getting two quarter-point cuts from the Fed this year following Trump’s remarks about Hassett.

Currency markets saw the dollar recover from session lows, while equity indexes slipped into the red.

Trump  stated he plans to choose someone who supports bringing rates down, and market participants had viewed Hassett as sharing that vision.

Trump’s search for Fed nominees has run into trouble in the Senate. Senator Thom Tillis, a key Republican on the Banking Committee, said he won’t back any of Trump’s picks until a Justice Department investigation into the Fed wraps up. Other GOP senators have pushed back on the probe too.

The subpoena sent to the Fed ramped up the fight between the Trump administration and the central bank over policy decisions. Powell slammed the probe as a barely hidden attempt by the White House to undermine the Fed’s independence. Officials in the administration say the inquiry makes sure tax dollars are handled properly.

Trump didn’t talk about that controversy Friday but said his decision isn’t final yet. He’s mentioned recently that he’ll announce his Fed chair pick in the next few weeks.

“We don’t want to lose him,” Trump said about Hassett. “We’ll see how it all works out.”

The two Kevins in contention

Late last year, Trump advisers saw Hassett as the frontrunner. But Trump has kept looking at other people for the job. In a Reuters interview earlier this week, Trump said he’s thinking about both Hassett and former Fed Governor Kevin Warsh, among others.

“The two Kevins are very good,” Trump said. “You have some other good people too.”

BlackRock executive Rick Rieder was at the White House on Thursday. Fox Business reported he interviewed for the role with the president and senior staff.

Powell’s term ends May 15. Treasury Secretary Scott Bessent is running the search. Trump has said Bessent removed himself from consideration.

Hassett downplays criminal probe

Hassett tried to play down the criminal investigation into Powell on Friday, saying he expects there will be “nothing to see here.”

The administration opened a criminal probe into Powell over cost overruns for a $2.5 billion project to fix up two old buildings at Fed headquarters. Powell disclosed the investigation Sunday and denies any wrongdoing. He said the actions were really about pressuring him for not cutting interest rates as much as Trump wants.

Hassett, who could replace Powell, told Fox Business Network he wished the Fed had been more open about the renovation costs going up.

“The bottom line is, I expect, you know, Jay is a good man, I expect that there’s nothing to see here, that the cost overruns are related to things like asbestos, as he says. But I sure wish they had been more transparent,” Hassett said.

The probe got criticized by foreign economic officials, investors, and former U.S. government officials from both parties. Even lawmakers in Trump’s own party see it as mixing politics with sensitive policymaking.

Hassett called the criminal probe a “simple request for information.”

“I’m sure the information will be forthcoming shortly, and then things will move forward,” he said.

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