Trump’s war against the Powell Fed has taken another political turn

Federal Reserve Chair Jerome Powell mostly breezed through two hearings on Capitol Hill this week but now heads into a much bigger challenge: a potential threat that President Donald Trump could undermine his authority by soon naming his pick to head the central bank next year.

As Powell testified Wednesday before the Senate Banking Committee, holding generally cordial exchanges with lawmakers, Trump was at the NATO summit in The Hague, Netherlands, lobbing his latest attacks on a man he had nominated for the Fed job nearly eight years ago.

“I think he’s terrible,” Trump said when asked during a news conference about his intentions for the next Fed leader. Trump then called Powell a “very average mentally person,” adding he has “a low IQ for what he does” and is “a very political guy.”

“I think he is a very stupid person, actually,” Trump said.

While Trump’s name-calling of Powell isn’t particularly new, the words now could signal action.

In the wake of the intense criticism, Wall Street has been buzzing over the potential for a “shadow chair,” or someone Trump could install as a central bank gadfly until Powell’s term expires in May 2026.

The talk has impacted markets: Traders on Thursday accelerated bets on rate cuts this year, with three reductions now at about 60% odds, compared with a strong likelihood of two just a few days ago, according to CME Group data. Treasury yields tumbled at the shorter end of the curve, which is where the Fed has its influence, falling much more than those at the long end. The dollar also was down sharply against its global counterparts.

Trump confirmed that he has a list of potential Powell successors down to “three or four people,” without naming the finalists.

The cadre of potential candidates has become familiar: Treasury Secretary Scott Bessent, National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh, and as a dark horse in-house pick Christopher Waller, who is a Trump appointee serving as governor and as of late has been an advocate for lower interest rates.

In some circles, Bessent has been considered a front-runner, though sources familiar with Trump’s thinking say that is not necessarily the case. Bessent himself has said he’s not interested in the job, though that could change if Trump would ask him to take it.

A report in The Wall Street Journal on Wednesday evening suggested that former World Bank President David Malpass also is in the running. The Journal report indicated that Trump is considering naming the successor sooner than expected in an attempt to influence interest rate policy.

White House officials did not respond to a request for comment beyond Trump’s remarks at the news…