The market doesn't buy into Trump's narrative: Limited room for rate cuts after the Fed's leadership change

[BlockBeats] What is the market thinking? Next May, Powell’s term as Fed Chair ends, and there are widespread rumors that Trump will appoint his chief economic advisor, Kevin Hassett, as the successor. Logically, a new chair might cooperate with Trump to implement massive monetary easing, but the signals from the interest rate futures market suggest otherwise.

Traders are voting with real money: by the end of 2025, the total rate cut might only be 75 basis points. What does that mean? Three cuts of 25 basis points each—and most likely, two of those will happen while Powell is still in office. By the time the new chair officially takes over in the second half of 2026, there may only be room for one more rate cut.

Why is the market so conservative? The core issue is still inflation. At the current pace, when the new chair takes over, inflation will probably still be hovering around 3%, with real interest rates close to zero. In other words, the monetary environment will already be quite loose, leaving little room for further easing. The aggressive monetary policy Trump wants? The market simply isn’t buying it.