Economic fundamentals remain strong… Incoming Chairman Kevin Warsh will likely have a difficult time swaying FOMC decisions.
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Economic fundamentals remain strong…Fed unlikely to cut rates significantly
"Economic fundamentals remain strong, and once Kevin Warsh is confirmed as Fed chairman, it will be very difficult for him to influence the decisions of the Federal Open Market Committee (FOMC)," the JPMorgan strategists wrote in a report.
JPMorgan noted that Warsh's nomination as Fed chairman raises questions about the direction of interest rate cuts this year.
JP Morgan Asset Management explained, "President Trump has nominated Kevin Warthy as his nominee for Federal Reserve Chairman. Warthy has a history of hawkish tendencies from his previous tenure as a Fed governor."
Friday's core inflation report will be a key indicator of the Fed's future.
The US is due to release its core inflation report on Friday, data that is expected to provide clues to the Fed's next move.
If inflation pressures appear to be easing, demand for short-term, policy-sensitive government bonds is likely to increase.
JP Morgan still expects one rate cut this year, even after the Fed left rates unchanged at last month's meeting. The market sees a rate cut at the March meeting as unlikely.
Increased Treasury yield volatility, tech stock selloffs, and employment data impact
Treasury yields experienced volatility this week. A selloff in tech stocks and strong U.S. jobs data sparked market debate about how President Trump's nominee for the next Federal Reserve Chair, Robert Werner, will handle policy.
JP Morgan analyzed that while Warsh's nomination signifies new Fed leadership, the economic environment will remain the same.
JP Morgan Global Research said, "Kevin Warthy's nomination as the new Fed chairman raises questions about the direction of rate cuts this year," but added, "JP Morgan still maintains a cautious rate cut outlook."
Joohoon Choi joohoon@blockstreet.co.kr
