Despite the change in Federal Reserve Chair, the market remains unconvinced of a sharp interest rate cut next year
BlockBeats News, December 9th. According to Reuters columnist and financial journalist Jamie McGeever, despite Federal Reserve Chair Powell's eight-year term ending next May, the market broadly expects him to be replaced by Trump's chief economic advisor, Kevin Hassett. However, market pricing clearly indicates that traders do not believe a Hassett-led Fed would significantly ease monetary policy as hinted by Trump.
In fact, based on pricing in the interest rate futures market, by the end of next year, the expected level of easing is barely 75 basis points. This amounts to just three 25-basis-point rate cuts—most likely two of which would occur before Powell's departure, leaving only one after the new chair takes office in the second half of 2026. The primary reason for this may be that during the Fed chair transition period, the expected inflation rate is still projected to hover around 3%, and when the new chair takes over, the real interest rate may be close to zero—indicating that the monetary policy environment is already very accommodative.
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