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

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.