US President Donald Trump’s remarks targeting the new Fed Chairman Kevin Warsh, along with ongoing tensions with Iran, have brought interest rate expectations and geopolitical risks back to the forefront of market concerns.
In the published interview, Trump offered Warsh a message of support at a time when investors are now pricing in a higher probability of interest rate increases rather than cuts by the end of the year.
According to CME FedWatch data, markets are currently pricing in a mere 0.5% probability of a rate cut by the end of the year, while the probability of a rate hike has risen to approximately 55%. This picture reflects strengthening concerns about the impact of recent rising inflationary pressures and energy prices on monetary policy.
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In the interview, Trump spoke positively about the new Fed Chairman, Kevin Warsh. Trump said, “I’ll let him do whatever he wants. He’s a very talented person, he’ll be fine and he’ll do a good job.” While these statements weren’t surprising given that Warsh was nominated by Trump, they have sparked debate in the markets about whether Trump will adopt a tougher stance on Fed policies in the future.
On the other hand, the lack of progress in negotiations with Iran and the possibility of a new US attack increased uncertainty in the markets. While Trump avoided giving a clear timeline for Iran to accept the agreement, he said, “Maybe two or three days. Maybe Friday, Saturday, Sunday, or the beginning of next week. Because we cannot allow them to have nuclear weapons.” Trump also stated that they could deliver “another big blow” to Iran if necessary.
*This is not investment advice.
