The leadership transition drama of the Fed is finally about to unfold. In May 2026, the current chairman Jerome Powell's two-term tenure will expire, and he will officially step down. However, the White House has been slow to announce a successor, leaving global markets in a state of anxiety. The two parties in Congress are also arguing fiercely over this position.

Currently, several popular contenders have gradually emerged. Kevin Hassett, a key member of Trump's economic advisory team, has the highest call for supporting interest rate cuts and is subtly giving off the vibe of a "shadow Fed chair." Another contender, Kevin Warsh, has served at the Fed and is experienced with a solid background, but his independence makes him somewhat difficult for Trump to gauge. There is also the current board member Christopher Waller, who has both a professional background and understands political balancing, and he is also in the running.

Trump's stance is very clear: the next Fed chair must support significant interest rate cuts. This condition directly influences the positions of the candidates. Hassett, as a loyal ally of Trump, is naturally a staunch supporter of rate cuts. Waller, although having a strong academic background, must also publicly express support for an accommodative policy in the current political climate. Meanwhile, veteran Walsh is observing the political winds, preparing to adjust his policy preferences accordingly.

The undercurrents of political gamesmanship pose unprecedented challenges to the independence of the Fed. The Senate Democrats barely hold the majority, while the Republicans are eager to gain more influence. If Trump publicly "attacks" the Fed Chair as he did in 2018, the uncertainty in the entire financial market will only multiply.

This uncertainty quickly triggered a chain reaction in the market. The exchange rate of the dollar began to fluctuate, and if the high interest rate environment continues, the debt pressure in emerging markets will become increasingly heavy. China is actively expanding the scale of currency swaps to stabilize the situation. On the other hand, safe-haven assets soared directly—gold's performance in 2025 completely crushed that of Bitcoin. Interestingly, despite the fluctuations in Bitcoin, institutional investors continue to accumulate it, clearly betting on the expectation of future easing policies.

What's even more absurd is that Wall Street's AI models are also adding fuel to the fire. Once the models predict who has the highest support, the market starts to stir in advance, which in turn forces the candidates to collectively "shut up and play deaf," fearing that one wrong word will be misinterpreted by AI. The result is that the situation becomes even more murky.

Will the defenders of high interest rates be able to laugh in the end, or will the reformers eager for rate cuts get their way? Once the new Fed chairman takes office, will a significant policy shift trigger a global market explosion? Right now, no one can provide a definitive answer, and everyone is anxiously watching the conclusion of this grand drama. Frankly, this power transition at the Fed is far more thrilling than any plot in a TV drama.