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Warsh takes over the Fed as US rate outlook does a U-turn

Donald Trump’s war with Iran has turned around US interest-rate dynamics. Markets are pricing in tighter policy from the president’s choice to lead the Federal Reserve, even after years of Trump berating the previous chair for not cutting rates.

Kevin Warsh took over the Fed on May 22, succeeding Jerome Powell. His first FOMC meeting and rate decision as chair is scheduled for mid-June. Warsh is likely to stand pat, but observers will be watching his language for signs of a “hawkish hold” – especially in the wake of hot inflation prints lately.

According to our calculations using the CME Group‘s FedWatch tool, markets are betting on a Warsh hike by December – and potentially even two hikes this year. As recently as mid-February, the market was expecting cuts rather than tightening.