The Selection Game: Trump Plays His Cards Close

President Donald Trump told The New York Times on Wednesday night that he's made up his mind about the next Federal Reserve Chair. The catch? He's not telling anyone—not even the person he's supposedly chosen.

When reporters asked about National Economic Council leader Kevin Hassett, Trump went full poker face. He wouldn't confirm anything but did note that Hassett is "certainly one of the people that I like." Which, in Trump-speak, could mean everything or nothing.

Prediction markets are having their own fun with the guessing game. Kalshi shows Kevin Warsh at 41%, Kevin Hassett at 39%, and Fed Governor Christopher Waller at 12% as the top contenders. Treasury Secretary Scott Bessent told reporters that Trump will make his decision in January.

The stakes are real. Current Fed Chair Jerome Powell's term ends in May, and Trump has made it clear that whoever gets the job needs to start lowering rates immediately. This isn't just about personalities—it's about the entire direction of monetary policy for 2026 and beyond.

Bessent Goes All-In on Rate Cuts

Speaking of Bessent, he delivered a speech Thursday before the Economic Club of Minnesota that basically amounted to a public plea for the Fed to ease up. The Treasury Secretary argued that cutting interest rates is the only ingredient missing for even stronger economic growth, and that the Fed shouldn't wait around.

Here's where it gets interesting: a subsequent draft of that same speech walked back the aggressive language. Instead of demanding rate cuts, the revised version merely called on the Fed to "do its part to spur investment." Someone apparently decided the first version was a bit too spicy.

Bessent invoked the ghost of Alan Greenspan, the former Fed Chairman who resisted premature rate hikes during the 1990s technology boom. The message was clear: keep an open mind, don't get trigger-happy with rate hikes, and remember that the economy can surprise you.

The Federal Reserve already approved three consecutive rate cuts in late 2025, totaling 0.75 percentage points and bringing rates down to a range of 3.5%-3.75%. But the pace of cuts is expected to slow considerably in 2026, which is why Bessent is making his case now.

What Markets Actually Expect

Here's the tension: the administration wants aggressive rate cuts, but markets aren't buying it. Current pricing suggests just two rate cuts for 2026, and Fed officials' most recent projections point to only one.

Polymarket data shows a 27% chance the Fed will only lower rates by 25 basis points twice this year, a 22% chance of three cuts, and just a 17% chance of four cuts. That's a far cry from what Bessent is asking for.

This disconnect matters because lower rates could support a weakening labor market, but they also risk reigniting inflation. The Fed is trying to thread a needle here, and the administration wants them to thread it faster.

Fed Governor Stephen Miran told Bloomberg TV that he wants 150 basis points of cuts this year to boost employment. He noted that underlying inflation is running at 2.3%, close to the Fed's 2% target, and argued they could add millions of jobs without triggering an inflation spiral.

Miran's term expires at the end of January, with the January FOMC meeting likely his last chance to directly influence policy. Trump is expected to nominate the next Fed chair who will take over Miran's seat.

Why This Actually Matters

The incoming Fed Chair will essentially decide whether the administration gets the aggressive rate cuts it wants or whether the Fed sticks to its cautious, data-dependent approach.

A dovish Fed Chair who delivers multiple rate cuts would likely support Bitcoin (BTC) and other risk assets by keeping liquidity conditions loose and weakening the dollar. Cheaper money tends to flow into speculative investments.

The two leading candidates offer different flavors. Hassett has suggested policymakers still have room to cut rates further, signaling a more dovish stance. Warsh, by contrast, takes a more hawkish view on inflation risks.

So we wait. Trump knows his answer, the markets have their guesses, and the Fed keeps doing its thing until someone new takes the chair in May. Just another day in monetary policy drama.