Trump’s endorsement of Kevin Warsh signals future rate cuts. The market for a 25 bps cut after the April 2026 meeting sits at 0.2% YES, up from 0% yesterday.

The market reaction has been tepid. Nominal odds increased only slightly, and the 50+ bps cut market remains at 0.1% YES. Traders appear unconvinced that Warsh’s nomination changes the FOMC’s hawkish stance given persistent inflationary pressures. The Fed decision market saw just $4,334 in USDC trading over the past 24 hours, indicating a lack of conviction.

With Trump’s backing, Warsh’s confirmation as Fed Chair is a separate question. The market treats his confirmation as more plausible given his alignment with GOP priorities and Trump’s rate-cut agenda. The real hurdle remains the Senate Banking Committee, where dynamics are less predictable.

Whether Warsh can shift the FOMC’s consensus on rate policy is what matters here. The likelihood of aggressive cuts is low: inflation at 3% and a cautious FOMC work against it. At 22¢, a YES share for a 25 bps cut pays $1, a potential 4.5x return. But that bet requires Warsh to win not just the chair but the committee.

Watch for Senate Banking Committee hearings on Warsh’s nomination. A favorable committee report could push confirmation odds higher. Weak job numbers or CPI cooling in upcoming releases would also strengthen the case for cuts.

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