Huatai Macro says markets have shifted from pricing dovish cuts to a more
hawkish near-term stance after Kevin Warsh’s appointment as Fed chair. With
forward guidance abandoned, expectations are highly split and pricing is more
difficult; focus will move from words to actions. Based on past chair
transitions, the current macro backdrop and Warsh’s need to build credibility,
Huatai assigns a slightly >50% probability of a July rate hike (versus the
market’s ~40%) and sees a near-100% chance of a hike before September. From the
new-chair/market interaction, the aggregate cost of hiking in July may be lower.
