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Jamie Dimon has signalled support for former Federal Reserve governor Kevin Warsh to be the US central bank chair, while also telling Wall Street executives that Kevin Hassett is likelier to back Donald Trump’s call for rate cuts.
The JPMorgan chief executive told the bank’s private conference for asset management CEOs in New York on Thursday evening that he agreed with Warsh’s writings on the Fed, people familiar with the matter said.
Dimon, one of the most influential voices on Wall Street, also said that Hassett was more likely to cut interest rates in the short term were he to be Fed chair, the people said.
Trump, Treasury secretary Scott Bessent and other top officials interviewed Warsh at the White House on Wednesday, the Financial Times reported earlier this week. The president is expected to interview at least one other candidate next week. He has said he could announce his decision in the coming weeks.
Trump has relentlessly criticised current Fed chair Jay Powell for not bowing to his demand to drastically lower US borrowing costs to fuel faster economic growth and lower the US government’s debt repayments, labelling the Fed chair a “numbskull” and a “moron”.
Dimon warned earlier this year that “the independence of the Fed is absolutely critical” and that playing around with the Fed “can often have adverse consequences”. JPMorgan declined to comment on Dimon’s remarks on Thursday.
The Fed cut rates to a three-year low on Wednesday — the third quarter-point move in a row. But the bar for more action is now high, with Powell saying the Fed was “well positioned to wait to see how the economy evolves”. In a fractious meeting, several regional central bank presidents called for borrowing costs to remain on hold.
Trump has vowed to avoid making the same mistake as he did with Powell, saying loyalty and a willingness to lower rates aggressively are the key criteria for getting the job.
He told The Wall Street Journal on Friday that Warsh and Hassett were the frontrunners in the race. Betting markets still give Hassett higher odds.
Hassett has sought to play down concerns that he would ignore other rate-setters’ fears over inflation remaining too high, saying earlier this week that the Fed’s independence to set rates free from pressure from the White House was important.
However, the White House economist also supported Trump’s calls for a rate cut that was “at least double” what the majority of US rate-setters were willing to support.
A Washington insider who has served in both Trump administrations, Hassett’s closeness to the president has dogged his candidacy. Many academic economists and central bank insiders would prefer current Fed governor Christopher Waller for the role, who is also popular on Wall Street.
While many are wary of Hassett’s closeness to the president, Warsh is also an unpopular figure at the central bank due to his frequent criticisms of the Fed since leaving the institution.
The Hoover Institution economist is also viewed by some on Wall Street as too hawkish to win Trump’s backing, with transcripts of Federal Open Market Committee meetings from 2008 showing that Warsh was reiterating his concerns about inflation just days before the collapse of US investment bank Lehman Brothers.
Dimon’s comments come after the FT reported last week that Wall Street bond investors had expressed concerns about Hassett to Treasury officials, who had solicited feedback about the Fed chair candidates from market participants directly.
Several market participants in the $30tn Treasury market said they were worried about Hassett’s alignment with Trump.
Hassett, who also worked at the Fed during the 1990s and holds a doctorate in economics, has long been considered the leading contender for the role of next chair.
Market reaction to a potential Hassett nomination has so far been fairly muted, although two investors pointed to the jump in an important market measure of inflation — which estimates the average rate of inflation over five years in five years’ time.
The five-year, five-year forward has climbed by 0.06 percentage points, reaching its highest level in a month, since late November.
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