As a change of government approaches at the Federal Reserve, the most likely candidate for chairman has emerged

President Donald Trump knows who he will choose to be the next Federal Reserve Chairman, but he has not yet said so. Prediction markets are determined, but even the leading companies are holding back.

While that part of the mystery appears poised to be solved in the coming weeks, what is far less certain is what kind of environment the new central bank leadership will face at a potential crossroads in the U.S. economy.

National Economic Council Chairman Kevin Hassett has been called the clear favorite, boosted by last week’s Bloomberg News report that the five candidates to succeed current Chairman Jerome Powell, whose term ends in May, will be at a disadvantage.

Asked about the situation on Sunday, President Trump told reporters aboard Air Force One: “I know who I’m going to choose, yes, and I’ll announce it.” Moreover, when asked about Mr. Hassett, he grinned and added, “I haven’t said that. I’m going to announce it.”

The candidate himself took part in a weekend speech and fielded questions about his prospects. Hassett is in the same field as current governors Christopher Waller and Michelle Bowman, former governor Kevin Warsh and BlackRock’s head of fixed income Rick Rieder.

“I’m really honored to be joining such a great group of candidates,” Hassett told CBS’ “Face the Nation” on Sunday. He noted that the market had reacted favorably to reports that Trump had emerged as the favorite, and said Americans “can count on President Trump to pick someone who will make car loans cheaper, mortgages more accessible with lower interest rates.”

Moments earlier, Hassett had simply said on Fox News, “If he chooses me, I would be happy to serve.”

Market predictions have been hotly contested in recent days, with Hassett now firmly in the running. As of Monday afternoon, Karsi traders had a 79% chance, PredictIt had it at 75%, Polymarket had only 63%, and “no announcement by Christmas” had the second-highest chance at 22%, comfortably ahead of any of the other four finalists.

Regardless of who is actually chosen, the Fed is currently torn between officials who believe further rate cuts are warranted to avoid potential problems in the labor market and those who worry that inflation remains a threat and will be made worse by further easing monetary policy.

Futures market traders are giving an 87.6% chance that the next rate decision on Dec. 10 will see a contraction in trades that have been volatile in recent weeks.

President Trump and other administration officials have been vocal about their desire to significantly lower interest rates, which the president has said is a litmus test for the next speaker. In 2026, members of the rotating regional presidential membership that will gain voting power on the Federal Open Market Committee will lean hawkish, favoring fighting inflation and keeping interest rates stable.

But the coming Fed regime will be about more than interest rates.

Treasury Secretary Scott Bessent, who is leading the search for a Fed chairman, said in an interview with CNBC last week that he supports rethinking the Fed’s mission.

“Monetary policy has reached a stage of great complexity, and simply cutting interest rates is no longer enough,” he said. “I think we need to simplify things to some extent.”

Mr. Bessent particularly emphasized the role of regional presidents.

Although they have a relatively limited role (at least compared to the chair and board) in setting interest rates and other issues related to monetary policy, public comments by local leaders can sometimes move markets.

Bessent said this is part of a broader issue related to the Fed’s growing role in the economy and financial markets, primarily since the financial crisis, and that the Fed has played a pivotal role in implementing programs to guide the economy out of the worst economic downturn since the Great Depression.

“I think it’s time for the Fed to step back into the background and calm things down, work for the American people, and steer monetary policy in the right direction,” he said. “All of these speeches by bank presidents…are just redundant. Why don’t they actually come out and talk about issues that are meaningful to the American people rather than short-term prospects for the next meeting?”

Opinions on local presidents are important as local presidents will be reappointed in 2026. While the local board hires the president, approval from the Board of Governors is required. One of the issues Bessent commented on was that some presidents are not from the districts they represent.

Mohamed El-Erian, Allianz’s chief economic adviser, praised Bessent’s views.

“We don’t need a live feed from the Fed,” El-Erian told CNBC on Monday morning. “We need the Fed to calm things down. We need the Fed to take a step back and look at the bigger picture, kind of forward-thinking. And we need reform. We desperately need reform. And I think all five countries on the nominee list are committed to reforming their systems. This is important not only for the United States but for the global economy.”

Correction: The Fed’s next policy meeting will be Dec. 9-10, with interest rate decisions announced on the second day. A previous version of this article misstated the date.