USD: Market expectations and Fed Chair nomination – Rabobank

Rabobank's RaboResearch Team discusses the implications of Warsh's nomination as Fed Chair and the market's expectations regarding interest rate cuts. The report highlights that investors are pricing in less than two cuts by the end of 2026, with no full cut expected until July. The analysis suggests that the market may be overly firm in its expectations of Warsh’s hawkishness.

Market expectations for interest rates

"OIS curve‑implied pricing suggests that investors are pricing in less than two cuts by 2026 year‑end, and aren’t even pricing one full cut into the market until July."

"It’s unlike Trump—someone who has made his thoughts on monetary policy abundantly clear—to appoint someone as Fed Chair that he either fundamentally or practically disagrees with."

"Whether Warsh is in favor of one, two, three, or perhaps even no rate cuts this year, the path of cuts is arguably of less importance than the metaphorical sledgehammer he may wield upon the very structure of the Fed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)