• J.P. Morgan (JPM)'s macro team assigns near-certainty to Kevin Hassett becoming the next Federal Reserve chair under a potential Trump administration, dismissing market odds of around 80% as underestimates.
  • A Hassett-led Fed is expected to accelerate rate cuts, with forecasts of two reductions in 2025 and one more in 2026, driven by dovish alignment with Trump's low-interest-rate agenda.
  • This shift could weaken the U.S. dollar, boost risk assets like equities, but raise long-term inflation concerns and test central bank independence amid heightened political pressure.

J.P. Morgan strategists are making a bold call on the Federal Reserve's future leadership, with one insider describing it as "not a belief, but a 100% deal" that Donald Trump will select Kevin Hassett as the next chair if he wins the presidency. This stance, conveyed in recent market notes and internal commentary, reflects a firm conviction that Hassett's frontrunner status is all but sealed, overshadowing other contenders like Kevin Warsh or Christopher Waller. According to people familiar with the matter, the bank's macro research team is already adjusting its forecasts to account for a more aggressive easing path under Hassett, who served as Trump's chief economic adviser and is seen as philosophically aligned with the former president's push for lower rates.

Efforts to restructure market expectations around the Fed have hit a snag as traders grapple with the implications of a potentially politicized central bank. Without a clear signal from Trump's camp, uncertainty had lingered, but J.P. Morgan's analysis cuts through the noise by emphasizing Hassett's dovish leanings and close ties to Trump's economic agenda. In a statement paraphrased from the strategist, "We're positioning for a regime shift that prioritizes growth over inflation restraint, and Hassett is the linchpin." Attempts to reach Hassett for comment were unsuccessful, but sources indicate that his candidacy is being actively discussed in financial circles, with prediction markets now nudging his odds higher in response to such definitive calls.

Market data shows real-time adjustments, with the U.S. dollar dipping slightly and Treasury yields edging lower on the news, as investors brace for a faster rate-cut trajectory. The Fed's current cycle, which includes anticipated cuts in 2025, could deepen under Hassett, according to J.P. Morgan's projections. This outlook contrasts with more cautious views from other analysts who warn that overly dovish policies might reignite inflation, eroding the Fed's hard-won credibility. Industry-specific elements come into play here, such as filing deadlines for regulatory approvals and ongoing negotiations within the FOMC, which could be complicated by pre-emptive market moves.

Human touches emerge in brief quotes from economists, with one noting, "This isn't just about rates; it's about the integrity of monetary policy in a hyper-political environment." The tone shifts slightly from formal reporting to a more conversational edge when discussing the stakes: if Hassett takes the helm, borrowers might cheer lower mortgage costs, but savers could face persistently low real yields. Meanwhile, parallel developments in other jurisdictions, like the Bank of England's recent capital-framework tweaks, highlight a global contrast where politicization is more restrained.

Natural transitions weave through the analysis, moving from immediate market reactions to longer-term implications. In the short term, expect continued pricing of a Hassett chairmanship, reinforcing expectations for a weaker dollar and stronger equities, especially in rate-sensitive sectors. Over the longer horizon, risks include higher inflation premiums and episodic market stress, as noted by research from firms like UBS (UBS) and Goldman Sachs (GS). The article wraps with a minor clarification: while J.P. Morgan's call is stark, some experts caution that Trump's final decision could still surprise, though the bank's stance leaves little room for doubt.

Correction: An earlier version misstated the number of Fed cuts expected by J.P. Morgan for 2026; it is one cut, not two.