Trump hints at replacing Powell successor, leading to lower expectations of Fed rate cuts

After Trump hinted at nominating a non National Economic Council director, Hassett, to replace Powell, US bond prices fell and traders reduced their expectations for two interest rate cuts in 2026. The yield on two-year US Treasury bonds rose by 5 basis points to 3.61%, the highest level since the Fed's last interest rate cut in December last year. The short-term interest rate contract shows a decrease in the probability of the Federal Reserve cutting interest rates twice this year, and Wall Street banks have also abandoned their prediction of the Fed's interest rate cut at the January 28 meeting. Morgan inflation economists believe that the Federal Reserve will not further cut interest rates. John Fath, Managing Partner of BTG Pactual Asset Management in the United States, stated that the dovish bets in the market on the candidate for Federal Reserve Chairman have reversed.