38.2% Odds for Rate Cuts Under New Fed Chair Warsh — Down from 96%
By John Nada·May 18, 2026·4 min read
Kevin Warsh's Fed chair debut sees prediction markets cutting rate forecasts to 38.2%. Meanwhile, lawmakers urge Trump for CFTC nominations.
Kevin Warsh steps into the role of US Federal Reserve Chair on Friday, with a cloud of speculation hanging over potential rate cuts. Prediction markets like Kalshi peg the likelihood of an interest rate cut before 2027 at a striking 38.2%, a steep fall from 96% just a few months earlier.
The context? Warsh takes the reins from Jerome Powell, amid President Trump's vociferous calls for rate reductions. Powell, who faced Trump's ire for maintaining the rates between 3.50% to 3.75%, now passes the challenge to Warsh. The CME FedWatch Tool paints a different picture, with a resounding 98.8% chance that rates will remain unchanged through June.
Warsh's confirmation wasn't without its drama. The Senate Banking Committee saw Massachusetts Senator Elizabeth Warren raise concerns about potential conflicts of interest, pointing to Warsh’s substantial investments in AI and crypto sectors. She speculated on favoritism, suggesting the Fed might tilt regulatory scales towards Trump's interests.
Warsh's confirmation by the US Senate on Wednesday was largely along party lines, reflecting the political polarization surrounding his nomination. This vote signifies not only a shift in the Federal Reserve's leadership but also highlights the contentious economic policies that have characterized Trump's administration. Warsh, who was nominated by Trump, is expected to align more closely with the President's economic agenda than his predecessor.
As Warsh assumes his new role, the economic landscape is rife with challenges. The Federal Reserve's decision-making will occur against a backdrop of global financial uncertainty, with markets keenly observing how Warsh will influence monetary policy. The contrast between the Kalshi prediction market and the CME FedWatch Tool underscores the divided opinions on whether rate cuts will materialize under Warsh's leadership.
The next meeting of the Federal Open Market Committee, where interest rate decisions can be made, is scheduled for June 16. As this date approaches, financial markets are likely to react to any signals from Warsh regarding potential changes in interest rates. The high stakes involved reflect the broader implications of Federal Reserve policies on global economic stability and investor confidence.
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Trump's expectations for Warsh are clear. He has repeatedly expressed dissatisfaction with Powell's refusal to lower interest rates and has publicly stated that he would be disappointed if Warsh did not implement cuts immediately. This pressure places Warsh in a challenging position, balancing the administration's demands with the Federal Reserve's mandate to ensure economic stability.
Beyond interest rate decisions, Warsh's tenure as Fed chair could also impact the regulation of emerging financial technologies. With Warsh's disclosed investments in AI and cryptocurrency companies, there are concerns about potential biases in regulatory policies. These sectors are rapidly evolving and present both opportunities and risks for the financial system.
Meanwhile, the regulatory landscape for commodities and digital assets is under scrutiny. The Commodity Futures Trading Commission (CFTC), led by Trump's appointee Michael Selig since December, faces a staffing shortfall. Lawmakers are urging Trump to fill the vacant commissioner positions to ensure effective oversight, particularly as the Digital Asset Market Clarity Act looms. This legislation aims to establish a clear framework for cryptocurrency markets, which could have significant implications for innovation and regulation.
The intersection of Federal Reserve policies and the regulation of digital assets highlights the complexity of the current economic environment. As Warsh navigates these challenges, his decisions will likely have far-reaching consequences for both traditional financial markets and the burgeoning digital economy.
As stakeholders await Warsh's approach to monetary policy and regulation, the broader implications of his leadership are becoming increasingly evident. The potential for rate cuts, the influence of political pressures, and the regulation of new financial technologies are all critical factors that will shape the future of the US economy under Warsh's tenure.