- The White House confirms that President Trump will host the swearing-in ceremony for Chairman Kevin Walsh this Friday, who will officially take charge of the Federal Reserve.
- The market has fully lowered its expectations for a rate cut, with short-term interest rate futures indicating nearly a 100% probability that the Federal Reserve will maintain the current 3.50% to 3.75% rate range in June.
- Powell will remain a Federal Reserve governor until the related criminal investigation concludes, with the core of Federal Reserve policy facing the dual challenges of a power transition and rising inflation.
Policy Transition and Investigation Turmoil
Kevin Walsh, aged 56, is set to officially succeed Jerome Powell after passing the Senate vote. Although Powell's eight-year term as chairman ended last Friday, he chose to remain on the board until the criminal investigation into the severe cost overruns of the Federal Reserve's Washington headquarters renovation is fully concluded. This rare political and legal dispute had caused delays in Walsh's nomination process, which was eventually approved by the Senate on May 13 with a highly divided vote. During the transition period, Powell was sworn in as interim chairman to ensure continuity in monetary policy decisions.
Inflation Resurgence Suppresses Rate Cut Space
Walsh's return to the core of the Federal Reserve comes in a macroeconomic environment vastly different from the 2007 to 2009 financial crisis period. Currently, the annualized inflation rate in the U.S. continues to deviate from the Federal Reserve's established 2% target, with upward risks showing a spreading trend. The broad tariff policies implemented by the Trump administration have significantly increased the cost of imported goods, while military actions in the Middle East against Iran have caused severe disruptions to the global energy supply chain. The latest core data shows that rising energy prices are gradually transmitting to the service sector and other categories of goods, making inflationary pressures more persistent.
Market Pricing and Forward-Looking Game
Last week's unexpectedly high inflation data has triggered significant volatility in the bond market, with U.S. Treasury yields rising rapidly. Investors are readjusting their pricing of monetary policy for the second half of the year, with some institutions even beginning to factor in the risk scenario of a rate hike as early as December. Chicago Federal Reserve Bank President Austan Goolsbee pointed out that the continued rise in service sector inflation may not be entirely driven by one-off factors such as oil prices or tariffs, and future decision-makers will need clear policy direction guidance. The mid-June rate meeting will be Walsh's first test after taking office, where the policy propositions of the hawkish forces within the Federal Reserve may dominate.
