97% of Market Participants Expect Fed to Hold Rates... Focus Shifts to Powell's Successor

FedWatch Tool Shows 97.2% Probability of Rate Hold
Market Focus Shifts to Next Fed Chair
Rick Rieder, BlackRock CIO, Emerges as Top Candidate

Jerome Powell, Chair of the U.S. Federal Reserve (Fed), is speaking in a video message released on the 11th (local time). In this video, he revealed that the Trump administration threatened to criminally charge him regarding the Fed headquarters renovation. Photo by Reuters Yonhap News

Despite pressure from U.S. President Donald Trump to lower interest rates, the U.S. Federal Reserve (Fed) is expected to keep its policy rate unchanged at the January Federal Open Market Committee (FOMC) meeting scheduled for the 27th and 28th (local time). Since a rate freeze had already been widely anticipated, the market's attention has shifted more toward the selection of Jerome Powell’s successor as Fed Chair.

According to the CME FedWatch Tool of the Chicago Mercantile Exchange, the interest rate futures market is forecasting a 97.2% probability that the policy rate will remain unchanged at the January FOMC meeting this year. The probability of a rate cut stands at just 2.8%. The current rate is 3.50-3.75%.

As FOMC members have been expected to maintain a wait-and-see stance for an extended period, the market is focusing more on the next Fed Chair than on the FOMC meeting itself. On the 20th, U.S. Treasury Secretary Scott Bessent raised expectations by stating that President Trump may decide on a candidate for the next Chair as early as this week.

According to foreign media reports, three leading candidates are believed to be in contention. The final three are Rick Rieder, Chief Investment Officer (CIO) of Global Fixed Income at BlackRock; former Fed Governor Kevin Warsh; and current Fed Governor Christopher Waller.

Among them, CIO Rieder topped the nomination odds for the first time over the weekend. According to the online betting site Kalshi, Rieder’s odds of being nominated stand at 50%, followed by former Governor Warsh at 29% and Governor Waller at 9%. Kevin Hassett, Chairman of the White House National Economic Council (NEC), who was previously considered the frontrunner, has faded from prominence with just 8%. On the same day, the Polymarket platform also showed CIO Rieder with a commanding 47% probability.

Chair Powell’s official term runs until May this year. However, President Trump is expected to exert pressure on Powell by nominating his successor in advance. Nevertheless, even after his term ends, Powell can remain as a Fed Governor and exercise voting rights until January 31, 2028. Whether he will resign from the Board before then remains uncertain.

President Trump has criticized Chair Powell, blaming him for the Fed’s rate cuts being too slow. As a result, the new Chair is likely to be someone who aligns with President Trump’s policy direction. President Trump has also expressed a preference for a Chair in the style of Alan Greenspan, who served as Fed Chair for many years. Unlike the traditionally conservative Fed stance, former Chair Greenspan was known for his proactive monetary easing policies.

According to Axios, CIO Rieder has unusually published research notes containing economic analysis as a Chair candidate. In a memo analyzing employment data released on the 9th of this month, he argued that a surge in productivity is suppressing labor demand and that the labor market is weaker than headline figures suggest. He added, “While U.S. growth remains robust, it is difficult to say that the entire labor sector is contributing to this economic vitality,” suggesting that further rate cuts could be justified.