Federal Reserve Governor Christopher Waller

Following last Friday's developments, Federal Reserve Governor Christopher Waller has emerged as the leading frontrunner in the race for Fed Chair, which would provide significant relief to markets.

Another contender, National Economic Council Director Kevin Hassett, again called for interest rate cuts on Monday morning and described current Fed Chair Jerome Powell's Friday speech as "reasonable." However, Waller remains in the lead.

Waller's notable advantage lies in his early warnings that private sector employment weakness was more severe than data indicated, and his dissenting vote advocating for rate cuts at the July meeting. Since then, data has not only validated his assessment but also prompted Chair Powell himself to shift toward a more dovish stance.

Since reports emerged of Waller becoming the top candidate, his odds have risen significantly. Despite a growing list of candidates, he remains the market's most favored bet, even though his election probability had previously declined slightly.

Trump's repeated attacks on Powell, the surprise selection of Stephen Miran to fill a Fed Governor position, and current threats to Governor Lisa Cook to "resign or be fired" have renewed concerns about Fed independence, which continue to pressure the dollar. The Fed Chair position is critically important, while appointing Scott Bessent as Treasury Secretary clearly indicates Trump ultimately responded to Wall Street concerns.

Therefore, selecting a Fed Chair candidate with high credibility among investors would not only provide market relief but also help ensure that rate cuts are truly effective in stabilizing the labor market. Waller is viewed as a pragmatic dove and a firm defender of Fed independence within the establishment.