Market News: Kevin Warsh Takes Over as Fed Chair Friday as Rate Cut Hopes Hit Historic Lows

Kevin Warsh is set to be sworn in as the next chair of the US Federal Reserve Board of Governors on Friday, succeeding Jerome Powell in one of the most closely watched central bank leadership transitions in years — arriving at a moment when the odds of the interest rate cuts President Trump is demanding have collapsed to their lowest level since the current tightening cycle began. The US Senate confirmed Warsh largely along party lines on Wednesday. He is expected to assume the role on Friday, with his first major policy test arriving at the June 16 Federal Open Market Committee meeting — the next scheduled opportunity at which interest rates could be changed. Rate cut odds have collapsed The scale of the shift in rate expectations surrounding Warsh's arrival is striking. Prediction market platform Kalshi currently prices a 38.2% chance that the Fed will cut rates before the end of 2026 — down from 96% as recently as February. CME FedWatch is even more definitive, showing a 98.8% probability that the Fed leaves its benchmark rate unchanged at 3.50% to 3.75% through the end of June, with more than 94% odds of the same through July. The collapse in cut expectations reflects the broader macro environment Warsh is inheriting: back-to-back hot CPI and PPI prints, oil above $100 per barrel driven by ongoing US-Iran conflict and Strait of Hormuz disruption, and bond markets pricing in the possibility of rate hikes rather than cuts before year-end — a scenario that was considered highly unlikely just three months ago. Trump's expectations versus market reality The tension at the center of Warsh's confirmation is the gap between what President Trump wants and what market data suggests is appropriate. Trump repeatedly pressured outgoing chair Jerome Powell to cut rates, said in April he would be disappointed if Warsh did not immediately move to lower rates upon confirmation, and has publicly framed rate cuts as a priority for his second term economic agenda. Warsh, however, is widely regarded by markets as more hawkish on inflation than Powell — a reputation that has contributed to the collapse in rate cut expectations following his nomination. As Fed chair, Warsh will have significant influence over how policymakers approach the rate path, but the Fed's institutional independence means that presidential preferences do not translate directly into policy outcomes. Senator Elizabeth Warren, who opposed the nomination, said at Warsh's Senate Banking Committee confirmation hearing that confirming him could result in the Fed granting special accounts to the Trump family's crypto company or providing bailouts to connected Wall Street firms. Warsh disclosed more than $100 million in assets ahead of the April hearing, including investments in AI and crypto companies — disclosures that drew scrutiny from lawmakers concerned about potential conflicts of interest. CFTC nominations still outstanding Warsh's swearing-in comes as a separate regulatory gap is drawing attention from lawmakers. The Commodity Futures Trading Commission has been led solely by Trump's pick Michael Selig since December, following the departure of acting chair Caroline Pham. The agency has taken an aggressive stance on asserting exclusive federal oversight of prediction market platforms including Kalshi and Polymarket amid state-level lawsuits against those companies over sports betting classifications. On Friday, the Republican and Democratic leaders of the House Committee on Agriculture jointly called on Trump to nominate a full panel of CFTC commissioners, citing urgent regulatory issues. The lawmakers specifically flagged concerns about the CFTC's capacity to execute rulemaking if the Digital Asset Market Clarity Act becomes law — noting that a fully staffed commission would be essential to implementing the crypto market structure framework the CLARITY Act would establish. What it means for crypto For Bitcoin and crypto markets, Warsh's arrival as Fed chair represents both a near-term headwind and a longer-term variable. In the near term, his hawkish inflation reputation reinforces the higher-for-longer rate narrative that has driven $1.5 billion in Bitcoin ETF outflows since May 7 and pushed Polymarket bettors to assign a 65% probability that Bitcoin falls to $75,000 this month. The longer-term picture is more complex. Warsh's disclosed investments in AI and crypto companies have led some analysts to speculate that his tenure could be more nuanced on digital asset policy than his inflation hawkishness implies for traditional rate markets. His first FOMC meeting on June 16 will be the first real signal of how he intends to navigate the competing pressures of Trump's rate cut demands, re-accelerating inflation, and an increasingly fragile risk asset environment.