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Will the Federal Reserve's interest rate decision exceed expectations? Trump's personnel layout
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Platform]: Will the Federal Reserve's interest rate decision exceed expectations? Trump's personnel layout hides the big chess." Hope it will be helpful to you! The original content is as follows:
As the central bank of the United States, the Federal Reserve controls key monetary policy tools such as federal fund interest rate setting and market liquidity adjustment. Its decisions directly affect U.S. financing costs, asset prices and even global capital flows, and is one of the core influencers of the global financial market. Although its policy effect is restricted by economic cycles, the personnel www.xm-forex.composition and policy tendencies of the board of directors have always been the core variables in the market's prediction of interest rate paths. This article introduces recent personnel operations related to the Federal Reserve, and prompts the possibility of future interest rate resolutions exceeding expectations.
Trump's personnel operations: Fully control the key layout of the Federal Reserve Board
The current Trump administration is reshaping the Fed's decision-making structure through a series of personnel actions and paving the way for policy shifts.
Lisa Cook's resignation was not accidental - he has been launched by the U.S. Department of Justice for fraud in multiple mortgage applications (falsely reporting investment properties as "main residence" to obtain low interest rates). Trump's firing of Cook for "legitimate reasons" not only avoided public opinion controversy, but also directly cleared the power of relatively neutral policy tendencies in the council, making room for subsequent acquiring confidants.
Not for Stephen Milan to fill the seat, connecting with executive demands: Trump nominates Stephen Milan, the current chairman of the White House Economic Advisory Council, to fill Cook's vacancies and allow Milan to retain White House positions during his tenure as Fed. This arrangement breaks the tradition of "isolation of the Federal Reserve from the executive system", which means that monetary policy formulation will more directly connect to the Trump administration's economic demands (such as stimulating the economy through loosening), and policy independence will be further weakened.
Start the 2026 chairman www.xm-forex.competition and lock in long-term dominance: BaoWill's term as chairman of the Federal Reserve will end in May 2026. Trump has initiated candidate screening ahead of schedule. The preliminary list includes Kevin Walsh (former Fed director, with loose policy tendencies), Christopher Waller (current director, closely related to Trump's camp), and Kevin Hassett (currently director of the White House National Economic www.xm-forex.commission, who once advocated low interest rates to stimulate growth). All three candidates are highly consistent with Trump's policy preferences, and if elected, it will ensure that the board of directors is tilted towards a "loose orientation" for a long time.
If all the above personnel operations are implemented, Trump's camp will occupy four seats in the seven-member Fed Council (currently two close friends, Bowman and Waller, Gamilan and the new chairman), forming an absolute decision-making dominance - this structure will directly change the Fed's policy balance and pave the way for radical easing.
It is worth noting that the next midterm election during Trump's term will be held on November 3, 2026, and the nomination of the Federal Reserve's chairman and the personnel layout of the directors will be www.xm-forex.completed in the key nodes in the first half of the year of the election. The US president may win voter support for the Republican Party by controlling the Federal Reserve to implement loose monetary policies before the election, stimulating economic growth and improving employment data. This operation is exactly the same as the historical logic of Nixon's pressure on the Federal Reserve to cut interest rates before the 1972 election, both of which are to turn monetary policy tools into political bargaining chips for election games.
Political predictions under personnel-led: interest rate cuts may be higher than expected next year
Previously, the market's general expectations for the Federal Reserve's interest rate cuts next year were "2-3 times, 25 basis points each time, and 50-75 basis points for the whole year", but www.xm-forex.combined with the tilting trend of the board of directors' personnel layout, this expectation may be broken.
The interest rate futures market was the first to react: the current interest rate futures market has begun to revise its interest rate cut expectations next year - the previously implicit probability of "three interest rate cuts throughout the year" has risen from 50% to 70%, and the probability of "four interest rate cuts throughout the year" (total amplitude of 100 basis points) has also risen from 20% to 45%. If Milan's nomination is successfully approved by the Senate, this expectation will be further strengthened.
U.S. Treasury yields declined ahead of schedule, and the curve steepened: the 10-year U.S. Treasury yield has recently dropped from 4.3% to 4.0%, partially reflecting the pricing of "exceeding interest rate cuts"; in the future, as expectations heat up, the decline in the long-term yields (such as 10-year and 30-year) will be slower than the short-term, driving the treasury yield curve to "steeper", which is a typical signal that the market has digested long-term easing in advance.
Risk assets are under pressure at the same time as the US dollar and the differentiate: In the short term, the expectation of "exceeding interest rate cuts" will drive US stocks (especially growth stocks) to rise in phases, as the decline in financing costs is beneficial to corporate profits; but if interest rate cuts are confirmed in the medium and long term, US stocks may pull back again due to downward revisions.
The US dollar index will continue to be under pressure - if the Fed cuts interest rates far exceeds that of the ECB and the Bank of England, the US dollar's interest rate advantage will be further weakened, pushing funds to flow to non-US monetary assets.
Personnel may become the core variable, and pricing needs to keep a close eye on two major signals
Trump's personnel layout for the Federal Reserve has become the most core variable affecting the interest rate path next year - the Council that controls four seats will likely promote a rate cut beyond expectations, and the market will not wait for the policy to be implemented, but will gradually price in this direction.
For investors, we need to focus on two major signals: one is whether Stephen Milan's nomination has passed the Senate successfully (if approved, the probability of personnel layout implementation increases greatly); the other is whether there are expressions such as "focusing on economic downturn risks" and "preparing to use greater policy tools" in the minutes of the FOMC meeting (if it appears, it will directly verify the possibility of interest rate cuts beyond expectations).
After all, the current policy tendency of the Federal Reserve is no longer simply determined by economic data. The tilt of the personnel structure is reshaping the policy logic - according to this idea, if the operation is implemented, it will control four seats of the seven-member board of the Federal Reserve. We can predict a rate cut that exceeds market expectations next year, and the market may price in this direction in advance.
The above content is all about "[XM Foreign Exchange Platform]: Should the Federal Reserve's interest rate decision exceed expectations? Trump's personnel layout hides big chess" are carefully www.xm-forex.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your transactions! Thanks for the support!
Due to the author's limited ability and time constraints, some content in the article still needs to be discussed and studied in depth. Therefore, in the future, the author will conduct extended research and discussion on the following issues:
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