Steven Major, global macro advisor at broker Tradition Dubai, has said that President Donald Trump‘s Fed Chair pick Kevin Warsh could cut rates faster than market expectations.
Speaking on Bloomberg TV on Tuesday, Major stated that there could be “four or five rather than two” rate cuts. Prospects of further rate cuts and renewed inflation concerns have prompted investors to pick shorter-maturity bonds instead of longer ones, making the yield curve steeper.
Major stated that he is “not convinced” about the steepening of the curves and recommended shorter maturity treasuries.
Warsh Nomination Jolts Markets
Trump’s nomination of Warsh on Friday rattled markets. The SPDR S&P 500 ETF (NYSE:SPY) ended lower that day, gold and silver gave up their rally and suffered a historic selloff, and crypto assets extended losses into the weekend. According to David Mericle, an economist at Goldman Sachs, Warsh’s stance differs from the current Fed philosophy as he believes rate cuts should be combined with balance sheet reductions.
Warsh has also termed the Fed’s dependence on the monthly inflation and jobs reports as “reactionary” and “backward-looking,” and current bank regulations archaic. He called for a “a new, reformed American regulatory regime” for seamless disbursement. The radically different views of Warsh compared to those of the FOMC have aggravated concerns over market instability.
Fed Holds Rates As DOJ Probes Powell
Last week, the Federal Reserve left the rates unchanged at 3.5%–3.75%, after three cuts in 2025. Meanwhile, the Department of Justice initiated a probe against the outgoing Fed Chair Jerome Powell for alleged funds mismanagement in the Fed renovation. Powell dismissed the threat as “pretexts” to pressure the Fed into lowering interest rates.
The probe is a result of the escalation of Trump’s attacks on Powell.
On Monday, the president told reporters in the Oval Office that he wants U.S. Attorney for the District of Washington Jeanine Pirro to “take it (the probe) to the end and see.”
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