Analysis: The next Fed chair will face extreme stress tests, with frequent conflicts between rate cuts, tariffs, and inflation.

On December 5, the next Federal Reserve Chair under President Trump is already facing a series of formidable challenges: dealing with cautious financial markets, hard-to-interpret economic indicators, complex internal factions within the central bank, and a tough-minded president who will focus much of his energy this year on pushing for interest rate cuts. But as the final candidate is being chosen, Trump has further heightened the tension the successor to Fed Chair Powell will face—he is pushing policies that could exacerbate inflation, while still pressuring the Fed to declare victory over surging prices. Trump is also persisting with tariff policies, which have already driven up the cost of a range of goods, and the U.S. will engage in potentially high-risk trade negotiations with Canada and Mexico next year. These developments will continue to test a core Fed theory—that tariffs only cause a one-time rise in prices, rather than triggering a more troublesome inflationary cycle. The mission for the next Fed Chair is becoming increasingly precarious, and whoever takes over will find it difficult to manage these tensions, even Trump’s long-time adviser and current frontrunner, Hassett, is no exception. There may be limits to how much an authoritative Fed Chair’s statements can align with the Trump administration’s political messaging. Simultaneously cutting rates, claiming the economy is strong, and denying that tariffs drive inflation—these three positions are clearly contradictory.