Investors are scrutinizing how President Trump’s eventual Fed chair pick will handle the central bank’s massive $6.6 trillion balance sheet. This looming decision is overshadowing broader market expectations for monetary policy and future rate paths.

The balance sheet, swollen by post-crisis quantitative easing, represents a key challenge. Any move to shrink it faster than the current pace could disrupt financial markets and tighten borrowing conditions for corporations and consumers alike.

The next chair must navigate between unwinding emergency measures and avoiding a market meltdown. Their stance will signal the Fed’s independence and its approach to inflation and economic growth in a politically charged environment.