Is the Fed changing leadership? The market isn't buying into this narrative.

On December 9, a Reuters financial column pointed out that although there’s much hype about Trump’s chief economic advisor Kevin Hassett possibly replacing Powell (whose term doesn’t end until next May), traders are putting their money where their mouth is and telling you: don’t overthink it.

The pricing in the interest rate futures market says it all—by the end of next year, the most that’s expected is a 75 basis point cut, three cuts of 25 basis points each. What’s even more interesting is that of these three rate cuts, two might happen before Powell steps down, leaving new chair Hassett with only one shot in the second half of 2026 after he takes office.

Why are traders so "calm"? Just do the math: by the time the new chair takes over, the expected inflation rate will most likely still be hovering around 3%, and the real interest rate will be close to zero. What does this mean? Monetary conditions are already loose enough, so there’s really no need to step on the gas any harder. The market isn’t taking Trump’s hints at "massive easing" seriously at all.

So, when it comes to policy expectations, don’t just listen to what’s being said—watch what’s actually happening, and understand the data so you won’t get misled by the narrative.