Trump’s Federal Reserve Nominee Advocates for Lower Rates as Bond Yields Remain Unexpectedly High
- Trump narrows Fed chair candidates, intensifying speculation about rate-cut policies amid inflation-growth balancing. - Kevin Hassett emerges as frontrunner, aligning with Trump's accommodative stance as markets price in 2026 rate reductions. - Crypto inflows surge on rate-cut hopes, yet 10-year Treasury yields remain above 4% due to debt concerns and dollar strength. - Political shifts see Trump reversing Biden-era crypto restrictions, with House/Senate advancing regulatory reforms. - Fed's 2026 meeting
Trump Nears Decision on Next Fed Chair as Markets Eye Policy Shifts
Donald Trump is reportedly close to finalizing his pick to replace Jerome Powell as the head of the Federal Reserve, fueling speculation about the direction of U.S. monetary policy amid ongoing challenges with inflation and economic growth. As the central bank's December meeting approaches, officials are observing a mandated quiet period, but White House National Economic Council Director Kevin Hassett has emerged as a leading contender, with hints of a possible nomination before the end of the year. The individual chosen for this influential role will help steer monetary policy through 2026, a period when investors are already anticipating interest rate cuts to address a cooling job market and inflation that remains above the Fed’s 2% goal.
Financial markets have already factored in expectations for lower rates by 2026. Tools like the CME FedWatch indicate a projected federal funds rate near 3% by December 2026, down from the current 3.75%-4% range. Prediction markets also point to Kevin Hassett as the frontrunner to lead the Fed toward a more accommodative stance, echoing Trump’s preference for looser monetary policy. This sentiment has been reinforced by recent remarks from John Williams, President of the Federal Reserve Bank of New York, who suggested there may be further room to ease policy as employment pressures subside.
Ripple Effects Across Financial Markets
The Fed’s anticipated moves are having a broad impact, especially in the digital asset sector. Last week, digital asset investment products attracted $1.07 billion in new inflows, reversing a month-long trend of outflows as optimism for rate cuts grew. Bitcoin and Ethereum saw significant investments, while XRP set a new record with $289 million in inflows. Despite these developments, the yield on the U.S. 10-year Treasury remains above 4%, defying expectations that lower rates would push yields down. Analysts attribute this persistence to worries about government debt levels, a large supply of bonds, and the continued strength of the U.S. dollar even as the Fed signals a potential shift.
Political Dynamics and Regulatory Shifts
Political factors are adding further complexity to the outlook. While the Fed remains focused on its dual mandate of controlling inflation and supporting employment, Trump’s broader economic policies—including efforts to ease regulations on cryptocurrencies—are drawing attention. A recent report from the U.S. House criticized the Biden administration’s approach to digital assets, labeling it restrictive and uncertain. In contrast, Trump’s team has taken steps to undo these measures, with the House passing legislation on stablecoin regulation and the Senate advancing broader crypto oversight bills.
Looking Ahead: Key Decisions on the Horizon
The Federal Reserve’s schedule for 2026, with policy meetings set for January, March, and subsequent months, will be pivotal for future rate decisions. Current projections from policymakers suggest a cautious approach, with interest rates likely to stay above 3% in most scenarios through 2026. Nevertheless, if a new chair prioritizes rate reductions, the central bank’s actions will remain a central focus for investors weighing inflation risks against the possibility of economic slowdown, as many analysts anticipate.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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