Trump initiates plan to install a shadow Fed president

Now, the markets have never considered Fed policy to be accommodative under Powell since he started the massive rate hike cycle in 2022. Since the Fed began its rate cut cycle, all the markets have focused on is what a neutral policy looks like and how long it will take to achieve it. Under a new shadow Fed president, the person might signal to bond traders to become more aggressive if the labor data is breaking, thus causing the 10-year yield to drop below what any of us would imagine under Powell’s leadership.

Wall Street starts to forecast much lower rates

In an unusual announcement, Morgan Stanley on Wednesday morning stated that they expect the Fed to deliver seven rate cuts in 2026, starting in March, which would bring the terminal rate to 2.5% to 2.75%. Now, at first…