Trump expects rate cuts. Guess what!
Dramatic Change Since April
- On April 24, the market expected an eighth of a point rate cut in July 2026, holding through January 2027, then a rate hike in March. That’s roughly a 50 percent chance of a quarter-point cut with a quarter point hike in March of 2027.
- On May 24, the market roughly expected a quarter point hike by January 2027, then another quarter point hike in March.
- Looking further back, in March of 2026, the market expected one or two full rate cuts by the end of the year.
Trump’s Outlook Not Changed
The market’s outlook went from 1-2 cuts by the end of the year to two full hikes by March of 2027.
Trump expects Warsh to deliver rate cuts. Warsh won’t come close.
FOMC Fireworks Coming Up
The fireworks start on June 17 when the FOMC next meets. That’s 23 days from now.
At the June meeting, I expect the Fed will change from an easing bias to a tightening bias. Warsh will dissent but Trump will howl.
All eyes will then be on Warsh’s first press conference as Fed Chair and Trump’s Truth Social account for verbal fireworks.
Marriner Eccles, who served as Chair from 1934 to 1951, is the only Fed Chair in history to have formally dissented on a monetary policy decision. He cast three dissenting votes between 1938 and 1939 during his tenure.
Eccles will be in the media soon.
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Add all of those up. Does it look stagflationary or not?
Rising Interest Rates: Why The Narrative Fails Against The Data | ZeroHedge
Nominal gdp is too high.
The inflation will be sticky for good. That’s because it’s not only about oil, but de-globalization driven by aggressive militarism.
Every major power can see or already feel the effects of sanctions or tariffs, and will create an ecosystem against it.
Globalization brought in global just-in-time delivery which drove down prices. De-globalization by inference will drive prices higher.
Another conundrum is the broken financial system that cannot exist without perpetual fiscal and monetary stimulus.
Prepare for a wild ride and inflation out the wazoo.
So much fun to watch! (I am studiously ignoring the adverse effects to We the Plebians here.) It is some compensation to me, to see Warsh arrive into such a pickle. He must hold his thumb out for a hammer blow in the first days. It is more fun than Anthony Scaramucci’s ten days. Trump has a new scapegoat and whipping boy, out of the gate. Warsh’s demeanor and credentials won’t mean a thing in Wrestling World! Like Jerome Powell, Warsh will finally be baited into lashing out, as if to a schoolyard bully.
All coonservatives know James Earl Carter was a great President, and that he destroyed his Presidency by selecting Paul Volcker to end the runaway Nixon-Ford inflation by radically raising interest rates thereby causing a recession. Which was blamed on Carter. Instead we got midget brains Reagan and Artie Laughter, and now we’re 39 trillion dollars of debt down the road from the wrongest turn in American history. So Warsh is talking about leaving rates as is? There will be no rate increases. Short of coonservative induced economic collapse, enjoy the coming decade, or more, of inflation.
Momentary inflation (hot employment, economy and stocks) might juice the numbers and save Trump’s midterms enough to really destroy us. That was the successful Nixon tack with Fed Chair Arthur Burns in 1971-72. And we got what you said: 10 years of inflation.
In the real world that my Mind WANTS to inhabit but overruled by this shit show: INFLATION numbers would be driven by “TRUFLATION” or a world that is not a concocted Narrative nauseating-inducing constant streams of headlines lies.
Otherwise, I feel great today. One more day above ground. I came close to dying recently and it changed me. I am no where near as wrapped up with this news. Sure, I am dimply aware but would rather be here with Mish and you other smart commentators. I no longer watch Mainstream news or I fast forward to the weather or use my Weather app.
Well don’t die on us but if you must let us know before it happens so we can say goodbye.
I really get stuck when that happens: who to tell?
Sometimes unasked-for turning points bring amazing things. I feel very alive right now, after my own version.
Warsh is saying he wants to channel Greenspan and keep rates steady in the era of growing productivity like Greenspan saw. How will the AI era turn out? How much more productive can the economy be without a net job loss?
All the FED needs to do is follow the market driven 2-year treasury rate. If the Fed does not follow the two-year rate, It is snake eating its tail; creating the problem it is trying to solve. Warsh should recognize Powells mistake in holding rates down after Covid. The market was raising rates, and the Fed was relying on lagging economic interpretations that causes the Fed to be late, AGAIN.
Inflation is coming but not because of oil-induced price hikes but because of the Fed’s reaction to Stagflation.
Does 2006 to 2008 sound familiar?? Oil went from $50 to $100 a barrel. ECB hiked rates in 2008 and was at ZERO in a year; All of this in the biggest recession in history; not officially recognized until a year later.
To those that believe in the Fed, DO NOT want to talk about stagflation because they are impotent to combat this economic state. The all-mighty FED is flaccid. The FED needs to be prescribed some interest rate Viagra with the 2-treasury rate.
Do you ever wonder why the Fed only talks about inflation? There are more conditions other than inflation and deflation; try stagflation or reflation. Prices are going up but incomes are stagnant. This leads to demand destruction. Demand Destruction is going to roll through companies and result in more cost cutting with layoffs and unemployment. Since the Fed is only looking at prices and not income, they are going to screw the working class with little to no assets by raising interest rates that will set off even more pressure on the economy that does not want to lend. The head of the snake is eating the tail.
Since inflation is a monetary phenomenon, there should be a large increase in money supply and loans, but there is none – which mean Stagflation – NOT INFLATION. The selling of treasuries and rising rates is not because of growth and inflation anticipations but because of supply and demand. US Treasuries are being sold forcible to get dollars to buy oil and defend currencies. Foreign countries (Japan and Turkey) are raiding their piggy bank (US Treasuries).
To combat the condition the Fed helped trigger with non-market-based(higher) rates, the FED will lower rates to ZERO and foster more money creation and then screw the working guy with inflation. BEST SYSTEM EVER!!!!
If all the fed needs to do is follow the market, then why don’t we eliminate the Fed and let the market set rates, which is what I have proposed for decades.
You are resilient, Mish. Decades of frustration has not affected your productivity. Thanks for this hard work, Man!
Unfortunately, due to emergency situations like wars, etc. it is better to have an institution in place rather than trying to stand one up in 30 days or less everytime an “unforseen event” occurs. I also like the idea of no Fed, because all the Fed is good for, outside emergencies, is funneling dollars to a corrupt plutocracy.
Good points
prices going up with no corroboration from monetary measures and stagnant wages leaves non monetary govt policy as the cause (tariffs, immigration, wars, tax policy, supported oligarchy in AI, etc. ).
Mish has endlessly pointed out the Trumps policies are pretty much all inflationary because of his high school level understanding of economics. This coupled with rejecting globalization is causing a total sea change in the way the pricing in economy works
it seems to me we will get higher rates then a rate collapse, for reasons you described, mainly because the Fed always uses the same playbook. Timing is fuzzy
some very sophisticated investors are already running this as a longer term strategy
Robert Prechter has made that point perfectly clear over 10 years ago by plotting the market rates and Fed interest rate actions on the same chart. Prechter then showed the rest of the world’s central banks do the same thing. Over 95% of the interest rate decisions came AFTER the bond market made a move.
As Mish questions, “Then why not get rid of the FED?”
No one wants to give up their source of easy money. When the FED creates money out of thin air to lend, the interest collected is tax free.
Because that would cause an intolerable slowing in the economy. There’s not perfect upward and downward price flexibility.
The “administered” prices (oligopoly, monopsony, and monopoly elements) would not be the “asked” prices, were they not “validated” by M*Vt (money Xs velocity), i.e., “validated” by the world’s Central Banks
In the end, WE can decide what to do and invest anyway we want. We don’t need the Fed to make out investment decisions. Without poor decision-makers how do we make money ;-))
Means-of-payment money supply has increased by over 1 trillion dollars since October 2025.
When is the next downgrade of the US’s credit rating?
Warsh will cut rates or he will be replaced and face legal actions from Trump.
warsh has one vote.
no matter what the Fed does, rates will rise.
What legal actions will Trump institute?
Probably something he pulls out of his ass. Look at what he tried with Powell.
Well, it didn’t work with Powell.
Powell was a short- timer, Trump just had to mostly shut up for a month or so and wait to get his puppet installed.
Warsh already participated in the ritual Trump ball- washing and is compromised by his own and his wife’s parents ties to Epstein.
Rate cuts coming due to expected AI productivity
classic damned if he does damned if he doesn’t?
The walrus is stuck between a rock and an ocean of debt filled with hungry orcas. Feed the orcas and get smashed by the rock, climb the rock and get knocked off by the next tidal wave at tide change. A classic lose-lose common to the Trump circus and revolving door of losers.
Do worry, Trump & Walrus will find a way to make things even worse.™
Got exit strategy?
The only exit strategy is for Elon and some baby mamas in an orbital yacht.
Can’t wait to see how taco’s boy handles this situation. Taco isn’t going to take no for an answer. I sure don’t envy him.
May I say, when you manage money (funds from others); unless you have no accoutbiilty you have to think about “what are my risks?”. The bond vigalantes exist bc if they are concernedd about risk they will NOT extend duration and risk their ass. That decline in longer durations softens up the price, increasing the longer maturities yields.
So we, Trump, my dog, can pound our chests over long rates being “too high” – but the risk/reward has to be there to keep long rates from rising. [Been there, managed over $1.2 Bil.] It’s the changes at the margin that drive the price changes. IF Warsh &/or Trump rattle fixed income money managers they will not risk their ass over it and rates will painfully rise.
W/ debt/GDP getting out of hand it has been my concern that we coulld reenter a secular rising rate enivornment. Meanwhile other currency(ies) may take over as currenies of choice.
I’m just saying, Warsh would do well to start out SOUNDING hawkish to not risk rattling Funde mnagers and Central banks. Losing credibility tends to be a self-fulfilling trend.
Bond markets have already made a secular shift. The COVID yield lows in 2020 marked the end of the Kondratieff Cycle yield bear phase. Rates are expected to rise into 2040. There will be shorter term yield pullbacks as part of the nominal 54 and 9 year cycles, contained in the 18 year cycle. Bond market is where it was in the mid 1960’s.
Warsh sold his soul to the devil. From countless Christian culture narratives, we know how this story will end.
Warsh did that years ago. In fact, I think everyone who visited Jeffrey Epstein on Lolita Island sold their souls.
Eccles AND Volker will be mentioned in news soon. Volker raised rates in the early 1980’s to stomp out inflation.
That’s “Volcker.”
Why would someone down-vote the correction of an error?
Maybe some embittered member of the volk doesn’t like the more Netherlandish spelling?
I was newly married in 1981 and all my new Father-in-law did was to complain about interest rates. He was addicted to borrowing and in a flash he was hitting me up for $44,000 to patch over a late payment on his new property. HE NEVER changed and since he did not pay me back, fuck him.
A nation engaging in excessive inflation (a taxation of its citizens, alongside a concealed form of default toward its creditors) deserves that sort of response too. Fool me once, ….