BREAKING: Trump Narrowed Fed Chair Search to Four Finalists, Announcement Imminent

DAVOS, Switzerland – January 21, 2026 — Treasury Secretary Scott Bessent revealed Tuesday that President Trump has narrowed his search for the next Federal Reserve Chair to four final candidates and will announce his decision “maybe as soon as next week,” sending Treasury yields higher and adding another layer of uncertainty to already-volatile markets.

The Announcement

Speaking during CNBC’s “Squawk Box” at the World Economic Forum, Bessent provided the most detailed timeline yet for one of the administration’s most consequential appointments.

Bessent’s Key Quotes:

“My guess is the president will reach a decision maybe as soon as next week. We’ve had substantial conversations about this. We’ve run a process that started in September—11 very strong candidates. We’re now down to four candidates. The president has personally met with all of them, and it’s going to be his decision.”

The announcement immediately impacted markets:

10-year Treasury yield: +6 basis points to 4.29%
S&P 500 futures: -0.2% on the news
Financial stocks: Mixed reaction
Dollar Index: +0.3%

The Four Finalists

While Bessent declined to identify all candidates, market consensus points to:

Candidate	Current Role	Fed Experience	Market View	Odds
Kevin Warsh	Former Fed Governor	2006-2011 (5 years)	Hawkish (negative for stocks)	65%
Kevin Hassett	NEC Director	Advisory only	Dovish (positive for stocks)	25%
John Taylor*	Stanford Professor	Advisory roles	Rules-based moderate	7%
Judy Shelton*	Trump Institute	Failed 2020 nomination	Unconventional	3%

*Rumored but unconfirmed

Warsh vs. Hassett: The Battle

The selection is widely viewed as a two-person race with dramatically different implications:

Kevin Warsh: The Inflation Fighter

Profile:

Age 55, investment banker background (Morgan Stanley)
Served as Fed Governor during 2008 financial crisis
Known for hawkish inflation views, QE skepticism
Close Wall Street relationships but independent-minded

Policy Stance: Advocates preemptive rate increases to combat inflation before it embeds. Criticized Fed’s pandemic response as “too little, too late.”

Wall Street Journal op-ed (December 2025): “The Fed’s credibility depends on its willingness to tolerate short-term economic pain to achieve long-term price stability.”

Market Impact if Selected: ✗ Treasury yields rise (fewer rate cuts expected) ✗ Stock valuations compress (higher discount rates) ✓ Dollar strengthens (higher rates attract capital) ✓ Financial sector benefits (steeper yield curve) ✗ Tech/growth stocks under pressure

Kevin Hassett: The Growth Champion

Profile:

Age 60, current NEC Director
Chaired Council of Economic Advisers in Trump’s first term
Co-authored “Dow 36,000” (1999)
Supply-side policy advocate, optimistic forecasts

Policy Stance: Favors accommodative policy to support growth and jobs. Argues AI-driven economy can achieve 3-4% GDP growth with 2-2.5% inflation.

Recent interview: “The Fed has been fighting yesterday’s inflation war while missing today’s growth opportunities. Old models don’t capture the new AI-driven reality.”

Market Impact if Selected: ✓ Stock markets rally (looser policy expectations) ✓ Treasury yields initially fall (rate cut bets increase) ✗ Dollar weakens (lower rates reduce appeal) ✓ Risk assets broadly benefit ✗ Medium-term inflation concerns emerge

Friday’s Sentiment Shift

Until Friday, markets expected Hassett would get the nod. Then Trump stated he might keep Hassett at NEC “rather than moving him to Fed”—implying the Fed Chair role goes elsewhere, likely Warsh.

Treasury yields immediately jumped 12 basis points (4.08% to 4.20%) on this interpretation.

Kathy Jones, Charles Schwab: “The market’s violent reaction shows how significant this choice is. We’re talking about potentially 100-150 basis points difference in where Fed Funds rate ends up over next two years.”

The Timeline Crunch

Current Fed Chair Jerome Powell’s term expires February 5, 2026—just 15 days away.

Critical Dates:

January 21-27: Trump announces nominee
January 28-31: FBI background check begins
February 5: Powell term expires
February 15-March 1: Senate Banking Committee hearings
March 5-15: Senate floor confirmation vote

A multi-week gap with no confirmed permanent Chair creates uncertainty. By law, senior Fed Governor Adriana Kugler would serve as Acting Chair during any interregnum.

Senate Confirmation Challenges

The nominee must secure Senate Banking Committee approval, then full Senate confirmation—a process that has become increasingly contentious.

Committee Composition:

13 Republicans, 11 Democrats
Chairman: Tim Scott (R-SC)
Ranking Member: Sherrod Brown (D-OH)

Confirmation Outlook:

For Warsh:

Generally acceptable to inflation-concerned Republicans
Democrats may resist hawkish policies threatening jobs
Banking ties could draw scrutiny
Timeline: 4-6 weeks

For Hassett:

Republican skepticism over dovishness
Democratic concerns about Fed independence given Trump relationship
“Dow 36,000” predictions may resurface
Timeline: 6-8 weeks with complications

Senator Elizabeth Warren (D-MA): “The next Fed Chair must demonstrate unwavering commitment to Federal Reserve independence from political pressure. Any nominee viewing the Fed as White House policy extension will face serious questions.”

Market Positioning

Institutions are actively positioning for binary scenarios:

Warsh Scenario Trades:

Short duration (sell bonds)
Overweight financials
Underweight growth/tech
Long dollar
Reduce equity exposure

Hassett Scenario Trades:

Long duration (buy bonds)
Overweight technology
Long risk assets broadly
Short dollar
Overweight equities

Morgan Stanley’s Michael Wilson: “We’re in a rare situation where a personnel announcement could trigger market moves comparable to a 50-75 basis point rate change. Position sizing should reflect this binary uncertainty.”

Powell’s Legacy

Current Chair Powell leaves office February 5 after navigating:

Pandemic emergency measures
Worst inflation in 40 years (peaked at 9.1%)
Aggressive rate hiking cycle (0% to 5.25%)
Banking sector stress (March 2023)
Trump’s public criticism and criminal investigation threats

Powell Era Metrics:

Metric	Start (Feb 2018)	Current (Jan 2026)
Fed Funds Rate	1.50%	4.25-4.50%
Core PCE Inflation	1.8%	2.8%
Unemployment	4.1%	3.9%
S&P 500	2,823	6,830
Fed Balance Sheet	$4.4T	$8.1T

International Implications

As issuer of world’s reserve currency, U.S. monetary policy profoundly impacts global finance:

Europe: Worries about dollar strength under hawkish Fed
Emerging Markets: Fears capital outflows if U.S. rates rise
China: Watches Fed policy for trade/currency implications
Japan: Concerned about yen weakness from policy divergence

Christine Lagarde, ECB President (from Davos): “We respect Federal Reserve independence and U.S. selection process. However, in an interconnected economy, we hope for coordination to avoid unnecessary volatility.”

What Bessent Isn’t Saying

Despite detailed information, crucial questions remain:

Unanswered:

Has Trump definitively decided, or is timing aspirational?
Are all four candidates equally under consideration?
What role did recent market volatility play in accelerating decision?
Has Trump secured Senate Republican confirmation commitments?
Will nominee be asked for policy commitments as selection condition?

Bessent’s careful phrasing—”my guess” and “maybe as soon as next week”—suggests some fluidity. Trump is known for last-minute changes.

Historical Context

Trump’s Fed relationship has been contentious. He appointed Powell in 2018, then publicly criticized him for years:

Called Fed “only problem” for economy (Dec 2018)
Labeled Powell an “enemy” comparable to Xi Jinping (Aug 2019)
Demanded zero rates during pandemic (2020)
Launched criminal investigation into Powell (Nov 2025, later dropped)

This history shapes current selection—Trump seeks someone who won’t “undermine” his economic agenda.

Expert Opinions

“The Fed Chair selection is arguably the most consequential domestic policy decision of Trump’s second term. Get it right, and the economy could thrive. Get it wrong, and we risk either runaway inflation or unnecessary recession.” — Ray Dalio, Bridgewater Associates

“If Warsh is selected, expect market volatility as investors reprice rate cut expectations. If Hassett gets it, prepare for an initial rally followed by gradual inflation concern buildup.” — Mohamed El-Erian, former PIMCO CEO

Bottom Line

With Powell’s term expiring in 15 days and markets already stressed by Greenland tariff crisis, Trump’s Fed Chair decision carries enormous weight. The choice will influence interest rate policy through at least 2030 and shape inflation outcomes, growth rates, and market valuations for years.

The clock is ticking. Markets are watching. And within days, we’ll know who will guide the world’s most powerful central bank through one of its most challenging periods.