Original Title: "Rieder - Two weeks ago 'no one cared', now he is the 'most likely nominee' for the new Fed chair"

Original Author: Zhao Ying, Wallstreetcn

BlackRock executive Rick Rieder was seen as an outsider two weeks ago, but he has now become the most likely candidate to succeed current chair Powell in the prediction market. With his advocacy for interest rate cuts and focus on the real effects of monetary policy, he is becoming the "golden boy" candidate in Trump's eyes—supporting lower rates while not widely perceived as a threat to the Fed's independence.

According to Barron's on Tuesday, Trump described Rieder as "very impressive" after interviewing him earlier this month. Like Trump, Rieder has clearly stated that interest rates should be lower. His focus on the real effects of monetary policy, especially in areas like the housing market, aligns closely with the Trump administration's emphasis on affordability.

According to Polymarket data, as of Monday afternoon, Rieder's probability of being nominated stands at 43.5%, ahead of former Fed governor Kevin Warsh at 29%, current Fed governor Christopher Waller at 9.2%, and National Economic Council director Kevin Hassett at 7.2%. Trump has repeatedly hinted at wanting to keep Hassett in his current White House position, which may narrow the candidate pool.

Powell's term as chair will end in mid-May. White House spokesperson Kush Desai stated that any reports about the Fed chair nomination process are "meaningless speculation" until Trump officially announces. Nominees must be confirmed by the Senate.

Policy Propositions: Emphasizing Productivity Changes, Questioning Lagging Data

Rieder's core argument is that the Fed is overly reliant on inflation data that reflects past conditions, while not paying enough attention to economic changes. He believes that productivity gains from artificial intelligence, automation, and logistics are reshaping the economy and labor market, but traditional indicators are too slow to capture these changes. In his view, the impact of policy decisions on the economy has a long lag.

Analysts at BNP Paribas point out that Rieder agrees with the Fed's 2% annual inflation target and its communication style but holds an economic outlook that exceeds the consensus. He places greater importance on the scale and durability of productivity gains, as well as their effects on growth, inflation, and the labor market, compared to current Fed officials.

Darius Dale, founder of independent research firm 42 Macro, stated that inflation data often peaks in the later stages of the business cycle, and policy decisions based on this data come too late. Dale believes Rieder understands the scale of the ongoing productivity shift and the pressures high rates place on housing and labor mobility. "The committee will reflect the personality traits of the chair," Dale said, "at a time of structural change, you need someone who understands market and economic trends."

Housing Market Becomes Policy Focus

Housing issues are at the core of Rieder's public statements. Mortgage rates remain high, and housing activity has sharply slowed since the Fed began raising rates in 2022, worsening affordability, although there has been slight improvement in recent months. Rieder stated that high rates reduce housing turnover, limit labor mobility, and slow construction activity. These dynamics affect both employment and prices.

Trump has prioritized lowering mortgage rates, and Rieder's emphasis on housing aligns perfectly with this agenda. This position holds clear appeal for the White House.

Rieder also frequently discusses inequality and the distributional effects of monetary policy. In a 2024 interview with The Wall Street Journal, he stated that high rates have the greatest impact on borrowers, renters, and young families, while benefiting savers. He noted that high borrowing costs have a detrimental effect on low-income consumers without yielding significant benefits in terms of inflation.

Some Democrats have long believed that Fed rate hikes disproportionately impact low-income families. Rieder's comments echo this concern while still remaining within the existing framework of the Fed.

Path from Wall Street to Washington

Rieder joined BlackRock in 2009 during the turmoil in the credit markets. At that time, BlackRock acquired the $1.5 billion hedge fund R3 Capital Management, which he founded. Rieder was previously a well-known executive at Lehman Brothers, which sold its stake in R3 Capital when it collapsed during the 2008-09 financial crisis, and BlackRock acquired the fund to expand its fixed income investment management team.

The deal has paid off. Nearly 20 years later, assets have significantly increased. BlackRock CEO Larry Fink noted in this month's earnings call that the actively managed fixed income fund led by Rieder has attracted inflows in 2025, leading all active trading platform funds.

Several BlackRock executives have moved between Wall Street and Washington. Former President Biden appointed Fink's former chief of staff Wally Adeyemo as Deputy Secretary of the Treasury. BlackRock's former head of sustainable investing, Brian Deese, served as Biden's National Economic Council director, while the firm's former chief investment strategist, Mike Pyle, advised former Vice President Harris before returning to BlackRock.

Rieder's nomination would extend this pattern to a Republican administration. It would also raise common questions about conflicts of interest. Rieder's career has relied on bets related to interest rates and macroeconomic forces, which are partly driven by central banks. Officials in the Trump administration who previously accumulated wealth in finance, such as Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent, also faced similar scrutiny.

Rieder is not a newcomer to the Fed. He has served on the Federal Reserve's Financial Markets Advisory Committee, which provides policymakers with an external perspective.

Questions Remain About Policy Shift Space

Despite Rieder's views gaining attention, the Fed's policies remain profoundly influenced by the inflation surge during the pandemic. Policymakers have consistently emphasized the risks of prematurely loosening policy. BNP Paribas analysts warn that entrenched views on inflation within the Fed may limit the space for any policy shift under a new chair.

Warsh remains a strong competitor, but he advocates for internal reforms at the Fed, raising concerns among some current and former officials. He sometimes downplays the importance of market reactions to policy decisions. In contrast, Rieder's views may align more closely with Trump's expectations.

Rieder's rapid rise also reflects a growing focus on how monetary policy intersects with housing, labor, and productivity at a time when rates remain high and economic signals are increasingly difficult to interpret. This has propelled him quickly from the margins of the conversation to the center, potentially placing him in Powell's position come May.

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