Fed expected to hold rates steady, but markets eye potential policy shift as Trump narrows Fed chair candidates, favoring dovish Rieder.
US President Donald Trump has once again turned attention to monetary policy, saying interest rates will fall sharply once he names a new Federal Reserve chair to replace Jerome Powell. Speaking in Iowa on January 27, Trump said his pick would usher in a more aggressive rate-cutting cycle, reinforcing his long-held criticism that the Fed has kept borrowing costs too high for too long.
Powell’s term as Fed chair is set to expire in May 2026, and speculation around his successor has been building for months. Trump’s remarks suggest he plans to announce his nominee soon, setting the stage for a shift in market expectations around US interest rates.
Fed Expected to Hold Rates Steady for Now
Despite Trump’s comments, markets widely expect the Federal Reserve to hold interest rates steady at today’s FOMC meeting. According to the CME FedWatch Tool, there is a 97% probability of no rate cut, with the federal funds rate expected to remain in the 3.5%-3.75% range.
While near-term policy is unlikely to change, traders are closely watching the Fed’s guidance. Expectations for a rate cut by June have edged higher, especially as political pressure mounts and inflation continues to cool. Still, the Fed has maintained a cautious stance, citing trade tensions, tariffs, and geopolitical risks.
Who Could Replace Jerome Powell?
Trump has reportedly narrowed his shortlist to four candidates: BlackRock CIO Rick Rieder, former Fed Governor Kevin Warsh, White House economic adviser Kevin Hassett, and current Fed Governor Chris Waller. Prediction markets are currently favoring Rieder, who leads with roughly 48% odds, followed by Warsh at around 25%.
Rieder has publicly suggested that rates could be cut by as much as 100 basis points, a view that aligns closely with Trump’s push for lower borrowing costs to support growth, housing, and investment. However, the debate over Fed independence has intensified, with Powell continuing to defend the central bank’s autonomy amid political scrutiny.
Crypto analyst Anthony Pompliano highlighted that a leading contender, Rick Rieder, supports cutting interest rates by 100 basis points, signaling a much more dovish stance. Pompliano welcomed the idea, saying such an aggressive rate cut would be positive for markets and urging that the candidate be appointed as soon as possible.
Markets React: Bitcoin Price Slips While Gold Rally
Trump’s remarks also had an immediate impact on markets. The US dollar slid to four-year lows after he said he was not concerned about its weakness, signaling comfort with a softer dollar to boost exports. The dollar index hovered near 96, while the 10-year Treasury yield steadied around 4.24%.
Gold surged on the back of the weaker dollar, climbing above $5,200 to hit a new record high. Bitcoin, meanwhile, gave back earlier gains and drifted near $88,000, with traders weighing the longer-term impact of potential rate cuts against near-term Fed caution.
While Trump’s comments reignited expectations of easier monetary policy, the immediate outlook remains unchanged. The Fed is likely to stay patient, but with a leadership transition looming, markets are beginning to price in a future where political influence could play a larger role in shaping US interest rates.
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