Who wants to be a Fed chair?

Episode Summary

Executive Summary: The episode centers on the race to replace Jerome Powell as Fed chair amid Trump’s public attacks and shifting views on rates, tariffs, and inflation. Katie Martin and Robert Armstrong argue that Powell’s calm response reinforces Fed independence, while contenders like Christopher Waller, Kevin Hassett, Kevin Warsh, and Scott Bessent are positioning themselves around the president’s likely priorities and market realities.

Main Topics: Trump’s attacks on Jerome Powell and Fed independence (Priority: 5/5): The hosts discuss Trump’s insults toward Powell and argue that Powell’s restraint makes the Fed look more independent, not less, despite presidential pressure. Who is jockeying to become the next Fed chair (Priority: 5/5): They assess the leading names in the succession race—Christopher Waller, Kevin Warsh, Kevin Hassett, and Scott Bessent—based on their public comments and political fit. The Fed’s dual mandate: inflation vs. employment (Priority: 4/5): The conversation explains why the Fed may want to wait on cuts: inflation is improving but not at target, while the labor market is showing small cracks that could justify easing. Tariffs and the missing inflation pass-through (Priority: 4/5): They debate why tariff-driven inflation has not yet fully appeared, whether the market is underestimating it, and how inventory and pricing behavior may delay the effects. Market pressure as a constraint on Trump (Priority: 4/5): Armstrong argues that Trump may back down on tariffs if bond or equity markets react badly, suggesting markets may be a stronger check than rhetoric. Long/short segment: restaurant inflation and gardening (Priority: 2/5): Armstrong goes long restaurant inflation as a possible early inflation warning; Martin goes long gardening ahead of a community competition.

Key Arguments: Powell’s composure under attack strengthens the perception of Fed independence because he does not react emotionally and keeps to the mandate. The Fed is torn between slowing inflation and supporting employment; the labor market is weakening slightly enough to justify caution about waiting too long. Christopher Waller’s case for cutting rates soon rests on the idea that tariff inflation may be limited and the labor market is beginning to soften. Kevin Warsh appeals to inflation hawks and the White House because of his criticism of QE, fiscal accommodation, and mission creep at the Fed. Kevin Hassett is portrayed as a more political, courtier-like candidate who tends to echo Trump’s views, including on tariffs. Scott Bessent may have helped moderate Trump’s tariff stance by explaining bond-market concerns, showing how Treasury can influence policy behind the scenes. Tariff inflation may still arrive later, but uncertainty around the July 9 end of the tariff pause makes it hard to be definitive. Armstrong believes Trump cares deeply about market reactions and may ease tariffs if stocks or bonds rebel, even if he did not back down on Iran.

Data Points: Fed chair replacement timing: May next spring - Jerome Powell’s term ends next spring, opening the top Fed job Tariff pause deadline: July 9 - End of the 90-day pause on the April 2 reciprocal tariffs Tariff pause length: 90 days - The temporary pause on the “full-fat reciprocal” tariffs Inflation target: 2% - The Fed’s informal but important inflation objective Federal Reserve decision: Held rates steady - The Fed’s most recent policy meeting before the discussion Potential rate-cut timing advocated by Waller: July - Waller said the Fed should start cutting in July

Pivotal Quotes: "I hope Congress really works this very dumb, hard-headed person over." — Donald Trump: Trump attacking Fed Chair Jerome Powell before Powell’s congressional testimony "We can afford to wait." — The Fed: Summary of the Fed’s current stance: the economy is strong enough to delay rate cuts while watching inflation and labor-market data "You can't polish a turd, but you can roll it in glitter." — Katie Martin: A PR metaphor used to describe Scott Bessent’s job of making Trump’s policy look credible

Implications: The Fed succession fight is as much about politics as economics. Markets, tariffs, and inflation data will shape who looks credible, while Powell’s handling of pressure may set the template for future Fed independence.