Trump issues Fed Chair ultimatum following surprise GDP beat

Investing.com -- President Donald Trump has established a strict loyalty test for the next leader of the Federal Reserve, declaring that any candidate for the role must commit to lowering interest rates even when the economy is performing well.

The President’s comments, posted Tuesday to Truth Social, follow a surprise 4.3% annualized GDP growth rate for the third quarter, comfortably beating Wall Street expectations of 3.2%.

Key Highlights

• The Ultimatum: Trump explicitly linked the Federal Reserve chairmanship to his personal economic philosophy: "Anybody that disagrees with me will never be the Fed Chairman!"

• Market Mechanics: The President criticized the "modern market" for staying even or dropping on good news due to inflation fears, calling for a return to a "natural" market that rallies on strong data.

• Policy Shift: Trump rejected the central bank’s traditional practice of raising rates to cool "potential" inflation, asserting that "Strong Markets, even phenomenal Markets, don’t cause Inflation, stupidity does!" He added, "I want my new Fed Chairman to lower Interest Rates if the Market is doing well."

• Growth Targets: He suggested that without Fed "interference," the U.S. could achieve growth rates of 10%, 15%, or 20% GDP in a single year.

The directive significantly raises the stakes for the search to replace Chair Jerome Powell, whose term expires in May 2026. The leading contenders are currently seen as:

• Kevin Hassett: The current Director of the National Economic Council. A long-time Trump advisor, Hassett is viewed as the internal frontrunner who aligns closely with the President’s "pro-growth" supply-side theories.

• Kevin Warsh: A former Federal Reserve Governor (2006–2011) and Morgan Stanley veteran. Trump recently described Warsh as being at the "top of the list," noting his experience during the 2008 financial crisis and his vocal critiques of current Fed "institutional drift."

• Christopher Waller: A current Federal Reserve Governor appointed by Trump in 2020. Waller is considered the leading "institutional" candidate and interviewed with the President on December 17.​

Economic Context

The 4.3% GDP print was delayed two months by the recent government shutdown. While Trump hailed it as a "Golden Age" fueled by tariffs, the report also showed core PCE inflation at 2.8%, still above the Fed’s 2.0% target. Markets responded with caution; Treasury yields rose as investors weighed the President’s pressure against the likelihood of the Fed holding rates steady at its January meeting.

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