Winning rate rises to the top! The new Federal Reserve chair candidate "to be announced soon," Riedel "emerges as a dark horse"

BlackRock executive Rick Rieder's odds of becoming the Federal Reserve chair have surged in the competition for the position, with new developments in this months-long saga.

On January 23, Bloomberg reported, citing informed sources, that BlackRock executive Rick Rieder has attracted President Trump’s attention with his central bank governor-like demeanor and a series of proposals to reform the Federal Reserve.

The day before, Trump stated that he had completed interviews with candidates and had someone in mind. Trump pointed out that both Rick Rieder and Kevin Warsh are good candidates. U.S. Treasury Secretary Yellen indicated that Trump could announce this decision as early as next week.

According to reports, when Trump administration officials consulted investors on their views regarding the short list of candidates, Rieder received positive feedback from bond market participants. This week at the World Economic Forum in Davos, corporate executives and investors also privately expressed support for Rieder.

On the prediction website Polymarket, Rieder's chances of being elected as Federal Reserve chair surged from 6% to 49% this week, placing him at the top.

However, a concern has emerged within Trump's inner circle about whether Rieder would heed the president's intention for rapid interest rate cuts once in office or take an independent stance.

Wall Street Background and Policy Position

Reports indicate that Rieder's Wall Street credentials and his open attitude toward reforming the Federal Reserve enhance his competitiveness for the top position at the Fed.

As BlackRock's Global Chief Investment Officer for Fixed Income, he manages approximately $2.4 trillion in bond strategies, and his career began at Lehman Brothers, making him a seasoned market veteran.

Unlike the other three final candidates, Rieder has never held a position within the Federal Reserve system, which is seen as an advantage as he is not bound by traditional thinking or internal relationships within the Fed.

His critical views on the Federal Reserve have also attracted Trump. Trump praised him as "impressive" in a media interview this week.

Wall Street Journal mentioned that Rieder recently stated publicly that the interest rate level after a Federal Reserve rate cut is "still too high for the housing market to regain vitality," and pointed out that small businesses and young families, which rely more on debt, are still struggling.

He believes that the threat of inflation is "a thing of the past," and the Federal Reserve should focus more on the labor market, which has shown signs of fatigue recently. Tight monetary policy could have unexpected distribution effects, such as stimulating consumption among wealthy asset owners while harming small businesses and young workers.

Regarding the balance sheet, Rieder stated that the Federal Reserve should stop reducing its holdings to avoid turmoil in the funding markets.

However, Rieder is viewed by some investors as a pragmatist rather than a theorist, more likely to uphold the independence of the Federal Reserve as an institution. A senior executive at a large U.S. asset management firm stated:

Riedel is not an ideologue; he is more pragmatic. He is more likely to care about the historical evaluation of his future and values the long-term reputation and foundation of the Federal Reserve as an important institution.

Market expectations are that he will take a data-driven approach, seeking a balance between responding to the White House's demands and maintaining the independence of the central bank.

Candidate Selection Nearing Conclusion

Currently, the competition is still among Riedel, Hassett, current Federal Reserve Governor Waller, and former Federal Reserve Governor Warsh.

Trump stated on Thursday that he has completed interviews with candidates and has someone in mind, but did not disclose further details. Treasury Secretary Basant, who has led the search for the Federal Reserve Chair for several months, indicated that Trump could announce his decision as early as next week.

Regardless of who is ultimately nominated, the candidate must go through the Senate confirmation process. In the U.S. Senate Banking Committee, Republicans hold a narrow lead of 13 to 11. White House spokesperson Kush Desai stated in a statement:

Any reports about the Federal Reserve Chair nomination process are meaningless speculation before President Trump makes an announcement.

Trump has indicated that he hopes the central bank leader will be someone enthusiastic about interest rate cuts. Hassett is one of Trump's most senior economic advisors and has previously been viewed as a strong candidate for the position.

Several Republican senators have publicly expressed concerns about the independence of the Federal Reserve and privately questioned whether Hassett would be too compliant with the president's wishes.

However, Wall Street Journal mentioned that Trump indicated last week that he might prefer to keep Hassett at the White House to handle economic policy promotion. As of Saturday, Warsh's odds of winning have dropped from 64% earlier in the week to 33%