📉 Charts That Matter: Traders Bet on Rate Cuts from Powell’s Successor at the Fed
Date: June 28, 2025
Financial markets are increasingly tilting toward expectations of Federal Reserve interest rate cuts—driven, in part, by speculation around incoming leadership. While Fed Chair Jerome Powell remains in office, bets are mounting that his eventual replacement—possibly nominated by President Trump—will pursue a more dovish monetary policy.
🔍 Market Snapshot
- Rate futures pricing: Traders now fully price in at least five quarter-point rate cuts by the end of 2026—up from four just weeks ago.
- Treasury yields: U.S. government bond yields have fallen to two-month lows, reflecting rising market consensus on upcoming monetary easing .
- Stock performance: The S&P 500 and Nasdaq Composite both hit record highs this week, buoyed by hopes of lower interest rates, alongside optimism on inflation slowing and trade tensions easing.
🧭 The Fed’s Crossroads
- Leadership transition loom: Powell’s term ends in May 2026. President Trump has reportedly shortlisted candidates such as Scott Bessent, Kevin Warsh, and Christopher Waller, signaling the possibility of a more dovish successor.
- Diverging Fed voices: While Powell maintains resistance to immediate cuts, Fed members like Christopher Waller and Michelle Bowman now openly back a reduction as soon as July.
- Political pressure: Trump’s vocal criticism—labeling Powell “Mr Too Late” and “terrible”—intensifies, reinforcing market bets that the Fed will pivot.
💬 What Analysts Are Saying
- Morgan Stanley cautions that despite investor enthusiasm, the data may not support rate cuts in July or September, with inflation and economic resilience giving the Fed pause.
- Market analysts warn that appointing a politically aligned Fed Chairman won’t guarantee easier policy—post-appointment context and FOMC consensus remain crucial.
- Economists stress the importance of preserving Fed independence, noting that perceived political interference could have longer-term market consequences.
📈 Charts That Matter
- Rate futures curve: The implied probabilities show a significant shift—five cuts by end‑2026, up from four.
- Treasury yield dip: Recent movements in 2‑ and 10‑year yields support the narrative of weaker inflation expectations.
- Dollar impact: A weaker U.S. dollar reflects broader market sentiment that the Fed will ease faster than earlier anticipated.
📌 Watch This
- July and September FOMC meetings: Markets will scrutinize the tone of the upcoming board meetings and any revisions to projections.
- Inflation readings: Data like the PCE and CPI indexes, especially after tariff effects, will be pivotal in shaping Fed moves .
- Decision on Fed chair replacement: Any early nomination would substantially shift sentiment, though analysts caution it won’t automatically drive policy change .
🔮 Final Takeaway
As traders shift bets toward a dovish Fed, driven by expectations of leadership change and internal patience, the key risk for investors is overestimating the pace of rate cuts. Powell’s adherence to data and Fed unity may slow the momentum. Still, markets are clearly discounting a more accommodative future under a successor. The coming weeks—economic data, FOMC communications, and political developments—will define whether this optimism stands grounded or overextended.