Trump's Abandonment of Hassett Leads to Sharp Drop in Fed Rate Cut Expectations
According to Odaily, U.S. Treasury prices fell after Trump hinted at nominating someone other than National Economic Council Director Hassett to succeed Powell, leading traders to scale back expectations for two rate cuts by the U.S. in 2026. The decline in U.S. Treasuries pushed the two-year yield up by as much as 5 basis points to 3.61%, marking the highest level since the Federal Reserve's most recent rate cut in December. After Trump's comments about Hassett, short-term rate contracts reflected a decreased probability of the Federal Reserve making two 25-basis-point rate cuts this year. Meanwhile, the Treasury market continues to be unsettled by employment data released a week ago for December, prompting Wall Street banks that had previously predicted a rate cut at the Fed's next meeting on January 28 to abandon that view. JPMorgan inflation economists predict that despite the leadership transition at the Federal Reserve, there will be no further rate cuts. John Fath, managing partner at BTG Pactual Asset Management USA, stated: "The previous trade was a bet that whoever becomes the next Fed chair would be dovish. That stance has reversed in the past few days." (Golden Ten Data)
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