Trump finally holds his money ticket, the one he waved like a rare card before the final level. Kevin Warsh has just been knighted, and the FED is changing face in the hot spotlight. The White House dreams of more docile, almost domesticated rates. Behind this banking crowning achievement, the markets are already feeling the engine room heating up.
In brief
- Trump is intensifying his pressure on the FED to obtain rapid cuts in American rates from now on.
- Kevin Warsh inherits a central bank weakened by political tensions around Jerome Powell.
- Persistent inflation, oil under pressure and American bonds greatly complicate any future monetary easing.
- Bitcoin, AI and crypto markets already fear a less independent FED under growing political influence.
Kevin Warsh moves to the FED, Trump places his centerpiece
Kevin Warsh is scheduled to be sworn in Friday after a largely partisan Senate vote. He succeeds Jerome Powell, Trump's favorite target for months. The American president threatened Powell, criticized his high rates and insisted that the FED needed to loosen the screw.
In the interview picked up by NPR, Trump summarizes his grievance without varnish:
He's doing a bad job. He should lower interest rates.
Source: NPR
This arrival looks less like a quiet handover than a change of sides in a nervous strategy game. Elizabeth Warren has already attacked Warsh in the Senate, fearing a FED capable of offering special accounts or bailouts to those close to Trump.
Warsh reported over $100 million in assets, including investments in AI and crypto companies. The central question therefore becomes brutal: independent arbiter or advanced pawn on the presidential chessboard?
Trump calls for low rates, but the market locks the door
Trump is calling for a quick detente, but the odds tell a different story. On Kalshi, the chances of a rate cut before 2027 fall to 38.2%, down from 96% in February.
The CME FedWatch sees almost a 98.8% probability of status quo through the end of June. Even through July, the probability of stability remains above 94%. The political script therefore clashes with the cold engine of the markets.
US inflation remains at 3.8%, well above the 2% target. 20 and 30 year Treasuries also exceed 5%, toughening financial conditions. Then, the Strait of Hormuz adds a scorching layer to the oil scene.
A judge cited by NPR has already denounced the pressure exerted on Powell:
The government has provided no evidence that Powell committed any crime except displeasing the president. Abundant evidence shows that the dominant purpose of the subpoenas was to harass Powell or pressure him to yield.
Source: NPR
Crypto, AI, Wall Street: the “Warsh effect” enters turbulence mode
Wall Street hates fogs of command, especially when the FED changes captain. Speculative assets struggle when liquidity becomes scarce. Barchart recalls that bitcoin fell 83% after the arrival of Janet Yellen, then 73% after that of Powell.
When it was renewed, the drop further reached 61%. The crypto market is therefore experiencing this bloody kinematics.
Warsh arrives with a reputation as a hawk, criticizing overly loose monetary policies. Speculative AI stocks, small caps and growth stocks thus become the fragile units on the board.
Crypto investors are also monitoring the CFTC, which is still incomplete, while the Kalshi, Polymarket and CLARITY files await rules. In this arena, crypto does not only tremble in front of rates. She fears a less readable FED, regulation still under construction, and more expensive liquidity.
Numbers flashing on terminals
- Kalshi now only sees a 38.2% drop;
- CME FedWatch anticipates 98.8% status quo;
- US inflation: 3.8%, far from target;
- Long Treasuries: lasting pressure above 5%;
- BTC price: $76,824 during this writing.
The crypto market is already receiving an unfriendly signal from recent flows. Iranian tensions reportedly triggered $1.07 billion in outflows, according to reported data. Trump has won his access to the monetary throne, but crypto traders discover a still undermined plateau.
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