The number of traders expecting an interest rate cut at the March Federal Open Market Committee (FOMC) meeting has risen to 23%, following investor fears of a hawkish stance from Kevin Warsh, US President Donald Trump’s Federal Reserve chair nominee.
Investors and traders forecasting a rate cut surged by nearly 5% from Friday, when only 18.4% signaled they were expecting an interest rate cut, according to data from the Chicago Mercantile Exchange (CME) Group.
Those anticipating a rate cut in March forecast a 25 basis point (BPS) cut, with no investors expecting a rate cut of 50 BPS or more.
President Trump nominated Warsh in January as a replacement for Federal Reserve Chairman Jerome Powell, whose term is over in May.
Interest rate policy can influence crypto asset prices, with easing liquidity conditions seen as a positive price catalyst, and tightening liquidity conditions through higher rates impacting asset prices negatively, as access to financing dries up.
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Markets and investors spooked by Warsh’s nomination
“The nomination of Kevin Warsh as the next Fed Chair has shaken markets to the core,” crypto market analyst Nic Puckrin said in a message shared with Cointelegraph.
Puckrin attributed the sharp decline in precious metals toward the end of January and early days of February to investor perceptions of Warsh, who is viewed as more hawkish, meaning he is in favor of keeping interest rates higher for longer. He said:
“Markets are digesting Warsh’s views on future Fed policy, most notably the central bank’s balance sheet, which he says is ‘trillions larger than it needs to be’. If he does adopt policies to shrink the balance sheet, markets will have to reckon with a lower-liquidity environment.”
Thomas Perfumo, a global economist at cryptocurrency exchange Kraken, told Cointelegraph that Warsh’s nomination sends a ‘mixed’ macroeconomic signal to investors.
The nomination of Warsh may signal that liquidity and credit will stabilize in the US, rather than expand, as crypto investors had anticipated, Perfumo said.
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