Trump’s Nomination of Kevin Warsh Boosts March Rate Cut Bets to 23%

Posted on by

TLDR

  • CME data indicates that bets on a March rate cut climbed from 18.4% to 23% following Trump’s nomination for Fed chair.
  • Traders are now factoring in a 25-basis-point rate cut, even with Warsh’s hawkish policy stance.
  • Crypto markets are adapting to Warsh’s nomination amid worries about reduced liquidity.
  • ProCap’s Jeff Park states that Bitcoin could gain value even in a high-interest-rate environment.

Market expectations of a March rate cut have risen to 23%, up from 18.4% last week. This increase comes after investors grew concerned when President Donald Trump nominated Kevin Warsh as the next Federal Reserve Chair, introducing uncertainty about the central bank’s policy trajectory.

Market Changes Following Trump’s Nomination of Kevin Warsh

Investor expectations of a Federal Reserve interest rate cut in March have risen since Kevin Warsh was nominated as the next Fed chair. Per the , the likelihood of a 25-basis-point cut has increased to 23%, up from 18.4% just a few days prior.

nominated Warsh in January to take over from Jerome Powell, whose term expires in May. Many investors see Warsh as a policy hawk, which has created uncertainty about the Fed’s near-term monetary path.

Even with Warsh’s reputation, traders now seem to expect that political and economic conditions might prompt the Fed to cut rates earlier. Market pricing reflects anticipation of just one small rate cut, with no current indications of a larger or more aggressive easing cycle.

CME Data Indicates Rising Probability of a Rate Cut

CME Group’s most recent data shows a distinct rise in bets on a March rate cut. The 23% figure marks a notable shift in sentiment over a brief time frame. Market participants are closely monitoring for any signs that the new leadership might adopt a different approach than the current Fed Chair.

has rattled markets significantly, thanks to his long-held views on shrinking the Fed’s large balance sheet. Investors are weighing the possibility that he might back tighter financial conditions over the long run, even if a short-term rate cut happens.

Investor Worries About Liquidity and Policy Trajectory

Warsh has previously advocated for keeping rates higher to curb inflation and reduce the Fed’s balance sheet. This position has caused drops in some risk assets—such as precious metals and cryptocurrencies—in late January and early February.

As Warsh could soon lead the Fed, investors are revising their expectations for how monetary policy might change. Polymarket data that 27% of traders anticipate two rate cuts this year, while 26% see a chance of three. Only 13% are wagering on four cuts.

Crypto markets—usually stronger in low-interest-rate environments—might need to adjust to a more stable liquidity landscape. Warsh’s past criticism of expansionary policy adds uncertainty about how quickly the Fed can ease financial conditions.

Bitcoin’s Outlook Could Buck Traditional Trends

While lower interest rates have traditionally been viewed as beneficial for Bitcoin and other crypto assets, some analysts are pointing to a shift. Jeff Park, Chief Investment Officer at ProCap Financial, thinks Bitcoin’s next major rally could occur even if interest rates remain elevated.

“This is the mythical, hard-to-find perfect ideal of what Bitcoin is supposed to be,” Park . He characterized this phase as “positive row Bitcoin,” in which the asset gains value even with restrictive monetary policy. 

He contended that this would challenge the way traditional markets assess risk-free returns. Park also noted that coordination between the Fed and Treasury is insufficient, and that this could further influence how investors react to upcoming rate decisions.