Trump's Pressure on Fed 'Backfires,' Hawkish Candidate Warsh Overtakes Hassett

January 15 After the U.S. Department of Justice (DOJ) launched an investigation into Fed Chair Jerome Powell, the situation has moved counter to former President Trump’s expectations. The likelihood Powell will remain chair through his May 2028 term end has ticked up, while odds that Kevin Warsh—a more hawkish candidate for next Fed chair—will overtake Trump ally Kevin Hassett have risen. Trump may find himself playing a game of wits with the Fed all year. Polymarket data shows that shortly after Powell’s January 11 video response to the probe, odds he’ll leave the Fed board by May end or year-end plummeted. Currently, investors peg his May 30 departure chance at 45%—down from 74% earlier this month—while his year-end departure likelihood has slid from 85% to 62%. The prediction market has also revised expectations for Hassett’s nomination. As DOJ investigation news spread, Warsh has gained ground on Polymarket, overtaking Hassett. Policy analyst Dan Clifton notes that since last summer, Trump and Powell had an informal deal: if Powell stepped down when his term ends this May, Trump would stop opposing the Fed’s billion-dollar headquarters renovation. Trump previously slammed the plan, but his Fed criticism faded in H2 2023. That unwritten agreement broke last Sunday, making Powell’s stay as a regular Fed board member more likely. Constant personal attacks on Powell could ultimately be a wasted effort.