Despite widespread market expectations that Kevin Hassett will be nominated as the next Federal Reserve Chair, a Fed survey reveals clear reservations among respondents about his suitability.

A December survey showed that 84% of respondents anticipate President Trump will nominate Hassett, the National Economic Council director, to lead the Fed. However, only 11% believe the President should make this choice. Fed Governor Christopher Waller emerged as the top preferred candidate with 47% support, followed by Kevin Warsh at 23%. Yet, just 5% expect Trump to select either of them.

Concerns about Hassett appear centered on his commitment to the Fed's dual mandate (price stability and maximum employment) and the central bank's independence. 76% of respondents predict the next Fed Chair will be more dovish than current Chair Jerome Powell—cutting rates faster during labor market weakness and hiking slower when inflation exceeds targets. A 51% majority believe the next Chair may accommodate presidential demands for lower rates, while only 41% expect policy independence.

For this week's policy meeting, respondents anticipate a "hawkish cut"—a rate reduction followed by a pause. But they're deeply divided on whether the Fed should cut: while 87% expect a cut, just 45% endorse one. Markets forecast two dissenting votes, with only 35% predicting another cut in January 2026.

Richard Bernstein, CEO of Richard Bernstein Advisors, noted: "With GDP growth near 4%, inflation above target, extremely loose financial conditions, and ongoing deglobalization in product and labor markets, underestimating inflation risks from further cuts seems unwise."

Scott Wren of Wells Fargo Investment Institute added: "Despite strong arguments for holding steady, the Fed will likely cut in December."

Growth forecasts continue rising, with 2025 GDP expected at 2% and slight acceleration next year. Inflation is projected to remain above the 2% target for several years. "Persistent high inflation" has jumped from October's fourth-place ranking to become the top economic risk, followed by AI bubble concerns.

Diane Swonk, KPMG Chief Economist, observed: "Most haven't fully accounted for 2026's record tax refunds potentially stimulating the economy. This means we may also be underestimating lingering inflation risks."

The labor market shows no significant downward pressure, with unemployment expected to rise marginally next year before declining in 2027.

Some respondents argue rate cuts are warranted given actual or anticipated labor market softening. Allen Sinai, Decision Economics Chief Economist, stated: "The Fed is behind the curve again—this time on broad labor market weakness. A preemptive 50bps cut would be appropriate."

Despite growing AI stock bubble worries (90% now view them as overvalued, up from 79% in October), respondents still forecast 6% annual S&P 500 gains through 2027. AI stocks are estimated to be ~21% overvalued on average. Meanwhile, 60% see rising systemic risks in U.S. credit markets, up from 53%.

The dollar faces opposing forces from strong U.S. fundamentals (growth/inflation) versus expectations for Fed dovishness. Under a "hawkish cut" baseline, the greenback may see volatile range-trading rather than trending declines. On Wednesday (Dec 10), the DXY hovered near 99.25.

Investors should monitor inflation data, labor market shifts, and any new Fed Chair's testimony (if nominated) to determine which force ultimately drives the dollar. AI bubbles and credit risks remain potential "black swan" triggers that could abruptly reverse rate expectations' dollar impact.

At 11:16 Beijing time, the DXY traded at 99.24.