Rate-Cut Odds Fade as Warsh Prepares to Take Over

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Markets are increasingly pricing out near-term U.S. rate cuts as incoming Fed chair Kevin Warsh prepares to be sworn in Friday, taking over from Jerome Powell at a moment of sticky inflation, elevated oil prices and renewed scrutiny over the central bank’s independence.

Warsh was confirmed by the Senate in a 54-45 vote on May 13, and the White House ceremony would break with recent tradition, as Fed chairs are usually sworn in at the central bank rather than by the president.

Hot CPI and PPI Weaken the Case for Cuts

Inflation is the main reason cuts are now a harder sell. April consumer prices rose 3.8% year over year and producer prices jumped 6.0%, while tariffs and the Iran conflict pushed up imported goods and energy costs.

That leaves Warsh stepping into the job with inflation still well above the Fed’s 2% target and with little room to deliver the easier policy that President Donald Trump has openly favored.

Bond Markets Price in Hike Risk

Bond markets are sending the same message.Last week, investors priced in a 60% chance of a Fed rate hike by January as longer-dated Treasury yields climbed sharply, with the 30-year U.S. yield reaching 5.159% on Monday, its highest level since before the 2007 financial crisis.

Warsh’s first rate-setting meeting as chair will come in mid-June.Internal pressure for possible rate hikes could complicate Trump’s push for cuts, even though Warsh has previously supported lower rates and broader changes to Fed communication.

That sets up an immediate test: whether he uses his early days to sound patient and data-driven, or signals that the bar for renewed tightening is lower than markets had assumed.

Bitcoin Faces a Tougher Rate Backdrop

For Bitcoin and other risk assets, the implications are clear. A Fed that cannot cut, and may even need to keep hikes on the table, would be a tougher backdrop for speculative assets even as ETF demand and corporate buying remain supportive.

Warsh’s takeover does not guarantee a hawkish shift, but the macro environment he inherits makes rate relief look much less likely than it did only a few months ago.