Warsh Becomes Frontrunner for Fed Chair as Trump Signals Preference to Retain Hassett

Warsh Becomes Frontrunner for Fed Chair as Trump Signals Preference to Retain Hassett

2026-01-17 economy

Washington, Friday, 16 January 2026.
Betting markets surged to 60% for Kevin Warsh as the next Fed Chair after President Trump signaled he cannot afford to lose rival contender Kevin Hassett from the White House.

Market Reaction to White House Signals

Financial prediction markets reacted swiftly on Friday, January 16, 2026, establishing former Federal Reserve Governor Kevin Warsh as the clear favorite to succeed Jerome Powell. On the prediction platform Kalshi, traders priced Warsh’s chances at approximately 60%, while odds for National Economic Council (NEC) Director Kevin Hassett fell to 16% [2][5]. A similar divergence occurred on Polymarket, where Warsh held a lead with 60% compared to Hassett’s 15% [2]. This decoupling follows a period where the two candidates, frequently referred to as the “two Kevins,” were running in a near dead heat for the nomination [2][7]. The volume of capital wagering on this appointment highlights the intense public interest; as of Friday, total bets across these major platforms exceeded $230 million, calculated as 230.2 million based on reported volumes from Polymarket and Kalshi respectively [6].

Strategic Retention of Economic Advisors

The sudden shift in market sentiment stems directly from President Trump’s remarks at a White House health care event earlier in the day. While praising Hassett’s performance on television, the President explicitly stated a preference for keeping his top economic adviser within the administration rather than sending him to the central bank [7]. Addressing Hassett directly, Trump remarked, “I actually want to keep you where you are, if you want to know the truth” [1][2]. The President elaborated that moving Hassett to the Federal Reserve would effectively isolate a key ally, noting that Fed officials “don’t talk much” and expressing a “serious concern” that he would lose access to Hassett’s counsel if the nomination went forward [5][7]. Consequently, Hassett’s probability of securing the nomination plummeted by 18% on specific platforms following these comments [5].

The selection process is unfolding against a backdrop of unprecedented legal turmoil involving the current Federal Reserve leadership. On January 12, Chair Jerome Powell revealed he is under criminal investigation by the Department of Justice regarding allegations of lying to Congress and issues related to headquarters renovations [1][5]. This development has triggered significant political fallout; Senator Thom Tillis, a member of the Senate Banking Committee, has vowed to oppose any new Fed nominee until the legal matters concerning Powell are fully resolved [5]. Additionally, the central bank faces a Supreme Court hearing next week regarding a lawsuit filed by Fed Governor Lisa Cook against the President, further complicating the transition of power [7]. Powell’s current term as Chair is set to expire in May 2026, though his term as a governor extends through 2028 [1][6].

Imminent Decision Expected

Despite these complexities, a nomination appears to be approaching rapidly. President Trump has indicated that he intends to name a successor to Powell this month [2][6]. Speculation suggests the announcement could coincide with the President’s upcoming appearance at the World Economic Forum in Davos, Switzerland, next week, where he is scheduled to deliver a high-stakes speech [5]. While Warsh has taken the lead, other finalists remain in contention, including current Fed Governor Christopher Waller, whose odds hovered around 13% to 14% on Friday [2][5], and Michelle Bowman [2]. For now, however, the markets are betting heavily that Warsh’s experience and the President’s desire to retain Hassett at the NEC have paved the way for Warsh’s return to the Federal Reserve [2][6].

Sources


Federal Reserve Kevin Warsh