Trump's Fed Pick? He's Cutting First, And Cutting Powell Out

Federal Reserve Governor Christopher Waller made his most assertive case yet for a July rate cut—and signaled he's ready to take Jerome Powell's seat if President Donald Trump asks.Speaking Friday on Bloomberg TV, Fed’s Waller joined fellow policymaker Michelle Bowman in backing a July rate cut—an implicit alignment with Trump's push for looser monetary policy.Not only did Waller back a rate cut for the upcoming July meeting, he also said he would accept the job as Federal Reserve Chair in 2026 if offered.His remarks follow a tense week in Washington as speculation mounts over Powell's future. Waller Says He's Ready To Cut Now…“I laid out my case. I don’t think I could be any more clear,” Waller said when asked how he plans to vote in July.He warned of fragile underlying labor market data as a reason to ease rates now. While headline numbers look stable, he likened the private sector's condition to "walking on ice that's starting to crack.""Half of the job growth last month came from the public sector," he said. "When you dig into the data, the private sector is flat. CEOs aren't hiring or firing—they're just waiting."Waller also dismissed the idea that waiting six more weeks until September would make a meaningful difference, suggesting that the Fed should act preemptively rather than risk falling behind.Waller downplayed the inflationary impact of tariffs, aligning with economic theory that suggests one-time price shocks don't generate persistent inflation. He estimated that a hypothetical 10% tariff might only lift the inflation rate by 0.3 percentage points in the short term before fading."The rule of thumb is: one-third of the cost hits suppliers, one-third firms, and one-third consumers," he said. "These effects show up in the three- to six-month data—not in long-term expectations."He added that market-based inflation expectations remain anchored, indicating that investors have largely dismissed recent political noise, at least for now.…And Ready To Take Fed’s Job LaterWhen asked if he would accept the Fed's top job, he responded: "If the president contacted me and said, ‘I want you to serve,' I would do it.”While he noted that Trump hasn't reached out, prediction markets are already taking notice. According to CFTC-regulated betting platform Kalshi, Waller currently holds a 14% chance of becoming the next Fed Chair, behind Kevin Hassett at 31% and Kevin Warsh at 30%, but ahead of Treasury Secretary Scott Bessent, at 12%, and Judy Shelton, at 9%.Market ReactionsWaller's remarks fueled a drop in the U.S. dollar and lifted gold prices, as traders increased bets on near-term rate cuts. On Thursday, the S&P 500—tracked by the Vanguard S&P 500 ETF VOO—closed near record highs at 6,300 points.Market-implied odds of a 25-basis-point rate cut in September rose to 60%, up from 52% the previous day, according to the CME FedWatch Tool. Wall Street’s Big 7 Are Now Bigger Than China’s Entire Economy Image created using artificial intelligence via Midjourney.