Why Trump’s Choice for the Next Fed Chair Matters for Every South African

The United States Federal Reserve will meet in December to decide the interest rate. This rate sets the price at which banks, companies and households in America borrow money.

Because the United States (US) is the centre of the global financial system, that decision spreads across the world. Banks in other countries adjust their rates in response. South Africans eventually feel it through changes in how much we pay for things like home loans, car finance, and credit.

The interest rate decision is made by the Federal Open Market Committee (FOMC), which has 12 members and meets eight times a year. The Fed chair sets the agenda for each meeting and guides the discussion. Jerome Powell currently holds this position.

While each member's vote carries equal weight, the chair has greater influence by framing the debate and building consensus. The committee doesn't simply vote, it deliberates. The chair shapes that deliberation, determining which economic risks get priority and what policy options are even on the table. This means the chair's intellectual credibility and ability to marshal evidence matter as much as their formal authority.

The Fed does not need the president’s approval to make decisions. This independence allows it to take actions that may be unpopular in the short term, like raising rates to control inflation, without political interference. This influence arguably makes Powell one of the most powerful people in the world.  When Powell says rates will stay "higher for longer," that sentence moves trillions of dollars in global markets before the Fed actually does anything.

Powell's term ends in May 2026, and it is up to the President to name his successor. Trump has been clear that he will not reappoint Powell. Trump has publicly criticized Powell for not cutting rates more aggressively, arguing that higher rates are constraining economic growth. Trump has stated that the interest rate should not be higher than 1.75%. It currently sits at 4.5%.

Trump is considering five candidates for the position: two current members of the board of governors of the Fed, Michelle Bowman and Christopher Waller, a former Fed Governor Kevin Warsh, BlackRock director Rick Rieder, and National Economic Council Director Kevin Hassett.

According to a recent Bloomberg report, Trump’s preferred candidate is Hassett, a long-time White House insider and former adviser from Trump’s previous administration. Hassett serves as the Director of the National Economic Council, which makes him the president’s chief economic adviser. He has supported Trump’s America First agenda and defended Trump’s controversial tariffs on major trading partners.

Hassett is perceived to be the candidate most aligned with Trump's view that interest rates should fall. He is also viewed as more willing to cut rates than most current FOMC members. Should Hassett step into the position, the bigger question is whether he can convince the rest of the committee to support his views. The FOMC operates by consensus, not by directive. Hassett would need to demonstrate real intellectual credibility and marshal persuasive economic evidence to drive meaningful changes to the federal funds rate.

Trump faces a delicate balance. He needs someone who shares his economic views but who is also respected by markets and seen as independent. This is not just about political preferences; it carries real economic risk. Appointing his chief economic adviser to lead the supposedly independent Fed sends a clear signal about priorities, and markets will notice.

In the scenario where markets believe the Fed has cut interest rates too soon or for political reasons rather than economic ones, they may worry about rising inflation and the central bank's credibility. Investors could then demand higher interest on long-term US government bonds to compensate for the risk. Because US bonds are seen as the global benchmark for safe long-term lending, other governments must also offer higher rates on their bonds to stay competitive. As government yields rise, corporate borrowing costs increase as well.

This means consumers and businesses in South Africa end up paying more to borrow, even if the Fed has lowered short-term US rates. The mechanism is counterintuitive but powerful: a Fed chair who cuts rates to please the president might actually make borrowing more expensive globally if markets lose confidence in the Fed's independence. This appointment will decide the cost of money in every South African household.