It’s a virtual three-way tie to replace Fed Chair Jerome Powell as Fed chair when his term expires.
The CNBC Fed Survey found 24% of respondents saying President Donald Trump will replace Powell with Treasury Secretary Scott Bessent and 24% saying it will be former Fed Governor Kevin Warsh.
Close behind is Kevin Hassett, director of the president’s National Economic Council with 22%. More distant is current Fed Governor Chris Waller at 14%.
Trump repeatedly has called for Powell’s resignation, saying he’s been late to cut interest rates, and has considered firing him.
He’s also accused the Fed chair of mismanaging a $2.5 billion renovation of its headquarters and a separate building, a charge Powell has denied and for which the president has provided no evidence beyond the cost overruns.
After a recent visit to the construction site, the president appeared to ease off on his criticism of the project and the Fed’s monetary policy, and suggested he would not fire Powell. Powell’s term as chair concludes in May 2026 though he can stay on as governor if he wishes until 2028.
In the survey, 84% said the president would not fire Powell before his term ends in May. The 37 respondents include fund managers, economists and strategists.
“With the jockeying going on to become the next Fed chair already appearing inside the Fed, it is clear the Fed’s independence has already been compromised,” economist Joel Naroff wrote. “This has elevated long rates and weakened the dollar. There is little to believe that would change, especially given the expectation that the next Fed chair will be a Trump loyalist.”
Overall, respondents gave Powell a grade of B -, up from C+ when CNBC last asked the question in 2023. He received solid B’s on leadership, transparency, market knowledge and communication, but a C- on economic forecasting (up from a D in 2023). Respondents graded Powell with a B- on economic and regulatory expertise.
Former Fed Chair Ben Bernanke left office with a final grade of B and Janet Yellen’s final grade was a B+.
Policy outlook
The president’s pressure on the Fed to cut rate is believed by some respondents to be having the opposite effect.
While 56% say it’s having no impact on policy, 42% believe it makes rate cuts less likely. Just 3% say it makes cuts more likely. No respondent forecasts a rate reduction at this week’s meeting, although 27% believe the Fed should cut.
There could be two dissents at the meeting as two Trump-appointed governors have said they supported lower rates in July. But survey respondents see those cuts coming, with 65% expecting one in September and another one likely before year-end. That would bring the funds rate down to about 3.9%.
Further cuts are forecast for 2026, with the average respondent putting the funds rate at 3.5%, though that will remain above the average neutral rate of 3.3%.
US President Donald Trump speaks with Federal Reserve chair Jerome Powell (R) as he visits the Federal Reserve in Washington, DC, on July 24, 2025. T
Andrew Caballero-Reynolds | Afp | Getty Images
Tariff uncertainty remains the No. 1 threat to the expansion, followed by overall uncertainty about the president’s policy and continued high inflation. But overall, some of the uncertainty sparked by administration’s policies has eased.
Uncertainty around the economic impact of tariffs fell to 62% from 71% in June. And 65% expect a trade deal with China, up from 54%. A 51% majority now believes tariffs will result in only one-time price increases, rather than broader inflation, an 8-point gain from June.
“Trumpian uncertainties on the economy and policies are settling down,” wrote Allen Sinai, chief global economist/strategist at Decision Economics. “That is clarifying and very positive for equities. But there are still big, big societal, political, geopolitical, and non-economic uncertainties.”
Along with less uncertainty has come a modest boost in the economic outlook.
The probability of a recession in the next year has fallen to 31% from 38% in June and 53% in May after the president announced sharply higher “reciprocal” tariffs. GDP is forecast to rise 1.4%, up from 1.1% in June, though still below the more optimistic 2.4% in January.
The outlook remains for a recovery next year with an average 2.2% GDP forecast in 2026.
Troubles in the labor market
Unemployment is seen rising only slightly from the current rate of 4.1% to 4.4% this year and remaining stable at that level in 2026. But there are widespread concerns about the labor market slowing.
“Employment is not as good as some believe,” said Drew T. Matus, chief market strategist, MetLife Investment Management. “This, combined with housing issues and ongoing volatility, is likely to prompt a significant slowing in activity as we approach year-end.”
For most respondents, employment looks to be the key to whether the Fed is in the right place.
“The labor market is slowing, and the housing market is deflating. Ultimately this will force the Fed to cut interest rates,” said Troy Ludtka, senior U.S. economist at SMBC Nikko Securities Americas.
But Jack Kleinhenz, chief economist, National Retail Federation, wrote, “A relatively balanced labor market, the recent rise in the [personal consumption expenditures price index], and the potential for tariffs to push up inflation in the coming months justifies the cautious pace by the Federal Reserve. Even though uncertainty continues, the economy is expected to grow.”
Despite better growth and less uncertainty, respondents are cautious about the stock market this year.
The average respondent puts the year-end S&P 500 level at 6,344, below the close on Monday. It’s forecast to rise to 6,936 next year, a 9% increase.
But there’s also greater concern about overvaluation, as 84% see stocks as somewhat or extremely overvalued, up from 58% in June, and the highest in a year.
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