Despite the change in the Federal Reserve Chair, the market still does not expect a sharp rate cut next year.

On December 9, according to analysis by Reuters columnist and financial journalist Jamie McGeever, although Federal Reserve Chairman Jerome Powell’s eight-year term will end in May next year, the market widely expects he will be replaced by former Trump chief economic adviser Kevin Hassett. However, market pricing clearly shows that traders do not believe a Hassett-led Fed would loosen monetary policy as aggressively as Trump has suggested. In fact, according to interest rate futures market pricing, by the end of next year, the expected easing is barely 75 basis points. This amounts to only three 25-basis-point rate cuts—most likely two of which will occur before Powell leaves office, and only one after the new chair takes over in the second half of 2026. The main reason for this may be that during the Fed chair transition, the expected inflation rate will still hover around 3%, and when the new chair takes office, the real interest rate may be close to zero—which means the monetary policy environment is already quite loose.