Kevin Warsh Takes Office as Fed Chair; Markets Lean Toward Rate Hikes, Not Cuts

President Donald Trump, speaking at Kevin Warsh’s swearing-in as Federal Reserve chair on May 22, said he would guarantee the new chair’s independence on interest-rate policy.

Trump said U.S. employment indicators were at record levels and that, unlike his predecessors, Warsh clearly understands that a strong economy is a good thing. He added that the U.S. must address its debt problem through growth and said inflation would be contained without bringing America’s expansion to a halt.

Despite Trump’s upbeat remarks, investors and economists are split. CME FedWatch data show market participants assign virtually zero chance to a Fed rate cut for the rest of this year. Instead, attention has shifted to the possibility of an additional rate increase at one of the remaining Federal Open Market Committee meetings.

The Fed’s benchmark rate currently stands at 3.50% to 3.75%. CME data show the probability of a 25-basis-point rate increase at the next FOMC meeting on June 17 at 3.5%. The odds rise to 17% for the July meeting and to 67% for the December FOMC meeting, the last of the year.

As expectations for rate cuts disappear and macroeconomic uncertainty surrounding the Fed’s new leadership grows, risk assets including Bitcoin, other cryptocurrencies and stocks are coming under pressure. Low rates typically fuel rallies in risk assets by reducing borrowing costs. But a prolonged period of high rates, along with the possibility of further increases, is set to create meaningful downward pressure on markets in the coming months.

Bitcoin quickly reflected those concerns, falling below $76,000. On Binance’s Tether market, Bitcoin was trading at $75,733, down 2.4% from a day earlier. It was the first time in about a month, since April 30, that Bitcoin had traded below $76,000.