"Trump's Shadow Chair Threatens Fed's Credibility

President Donald Trump is increasing efforts to influence the Federal Reserve’s monetary policy decisions, raising concerns about credibility for the next central bank chair. Trump is considering naming a “shadow chair” to pressure the Fed into cutting rates, potentially undermining the institution’s independence and creating uncertainty in financial markets.

The idea of a shadow chair leaves investors uneasy, as Trump demands rate cuts to lower government debt costs, a departure from the Fed’s traditional data-driven decision-making process. Choosing a successor for Jerome Powell could raise integrity questions and lead to doubts about their independence, potentially affecting the credibility of the next Fed chair.

Treasury Secretary Scott Bessent is a potential replacement for Powell, but the idea of a shadow chair could disrupt financial markets and create uncertainty. Wall Street dislikes uncertainty, and aggressive rate cuts could lead to inflation fears and higher Treasury yields. Nominating a replacement early may confuse markets and hinder the Fed’s ability to shape rate expectations.

There is only one upcoming vacancy on the Federal Reserve board of governors, with Powell’s term ending in May 2026. Powell can stay on as governor until 2028, creating uncertainty about his successor. Trump’s push for rate cuts faces challenges as there are no members on the Federal Open Market Committee supporting the level of cuts he seeks, potentially unsettling markets and complicating the Fed’s decision-making process.

Read more at CNBC: Trump’s next Fed chair pick already comes with a credibility problem