Inflation Surge Could Challenge Fed Credibility
Treasury Secretary Scott Bessent has officially unveiled the shortlist of five final candidates to succeed Jerome Powell as Chair of the United States Federal Reserve. According to Commerzbank’s Head of FX and Commodity Research, Thu Lan Nguyen, the list includes well-known figures from both within and outside the central bank, reflecting a blend of institutional experience and executive influence.
The five individuals under consideration are:
Christopher Waller, current Fed Governor
Michelle Bowmann, fellow member of the Fed Board
Kevin Warsh, former Fed Governor
Kevin Hassett, White House economic advisor
Rick Rieder, BlackRock executive
These names have circulated frequently in recent weeks, and their inclusion in the final list comes as no surprise to market participants. As a result, financial markets have remained largely unmoved following the announcement.
While the list itself may not have shocked investors, analysts caution that the President of the United States is likely to appoint a candidate who aligns closely with his economic agenda. In the current environment, that means selecting someone who supports aggressive interest rate cuts—a stance that complements the Federal Reserve’s recent pivot toward monetary easing.
Another rate cut is widely expected this week, and the selection of a dovish candidate could reinforce expectations for further easing in the months ahead. However, Commerzbank warns that the politicization of the Fed may become more visible when the central bank faces a conflict between its dual mandates: controlling inflation and supporting employment.
As inflation continues to rise, the Federal Reserve may find itself in a difficult position. If the next Chair leans heavily toward rate cuts despite mounting price pressures, the US Dollar could face renewed downward pressure. This dynamic could intensify in the coming months, especially if inflation outpaces wage growth and labor market resilience begins to falter.
So far, the announcement has not triggered significant volatility in currency markets. Traders appear to be waiting for the President’s final decision, which is expected before the end of the year. The outcome will likely shape the trajectory of interest rates, bond yields, and currency valuations heading into 2026.
Investors are advised to monitor not only the Fed’s upcoming policy statement but also any signals regarding the long-term direction of monetary policy under new leadership. The balance between inflation control and labor market support will be critical in determining the Fed’s credibility and the strength of the US Dollar.