On Kalshi, probability that Trump will publicly insult Warsh before the end of the year has risen to 44%
Some traders are betting that President Donald Trump may soon sour on his Fed chair pick.
An interest-rate hike from the Federal Reserve on Wednesday is seen as a virtual certainty by most of Wall Street, although some believe a hold is still possible.
One thing is certain: President Donald Trump has been less than pleased with the recent trajectory of interest rates and has made clear his expectation that the Fed should move expeditiously to get borrowing costs down.
Some traders on Kalshi are betting that Trump will soon pressure Fed Chairman Kevin Warsh, whom the president picked to replace his previous choice, former Fed Chair Jerome Powell. One Kalshi prediction market now reflects a 44% chance that Trump will publicly insult Warsh before the end of the year, more than double where it stood a month ago.
Trading volume in this market is relatively tiny, with about $120,000 changing hands since its launch earlier this year, according to Kalshi data.
Trump has a history of clashing with Fed leadership, leading some critics to argue that the White House was unduly infringing on the central bank's policy independence.
The end of Powell's tenure at the central bank's helm was marked by a feud with Trump. In a series of Truth Social posts and comments to the media, Trump repeatedly taunted the Fed chair, calling him Jerome "too late" Powell for his reluctance to cut interest rates more quickly. The Justice Department launched an investigation into Powell tied to renovations at a Fed building. Powell remains on the central bank's board of governors.
Traders overwhelmingly expect the Fed to hike rates on Wednesday, with fed-funds futures - a trading instrument to hedge the path of Fed interest rates - reflecting more than a 90% chance of a hike. The market is starting to expect more hikes even beyond the end of 2026, according to data from CME Group.
Since the beginning of the central bank's modern era about 50 years ago, it has been extraordinarily rare for a sitting Fed chair to dissent on a decision on interest rates. The most notable example occurred in 1986, when then-Chair Paul Volcker was outvoted by his fellow Fed governors in a decision to cut the discount rate, an interest rate charged to banks for collateralized short-term loans.
Although Volcker delayed the implementation of the cut, the incident spurred speculation that he might resign his position at the Fed, according to media reports from the time.
Following Warsh's speech at Jackson Hole, Wyo., where the Fed chair said once again that the central bank would bring inflation to heel, Trump appeared willing to give Warsh a pass to hike rates. Asked by a reporter about the possibility that the Warsh Fed might hike, Trump said he had a lot of respect for Warsh, and that the Fed chair would "do what he has to do." Trump went on to insist that the U.S. should pay the lowest interest rates in the world because it has the world's strongest economy.
Even so, the president has largely kept up his drumbeat of comments insisting that interest rates in the U.S. should be lower.
Speaking to reporters at the Irish Open golf tournament over the weekend, Trump said he didn't know whether the Fed would raise interest rates this week, but that he felt rates in the U.S. should be lower.
The fed-funds rate, a benchmark overnight lending rate that his actively managed by the central bank, reached its near-term peak in the summer of 2023, but it has been cut several times since then, including a 50-basis-point reduction in September 2024 to kick things off under Powell. But pressure to hike rates has been building as yields on longer-dated Treasury notes and bonds have pushed to their highest levels in decades.
Inflation concerns have contributed to the uptick, along with signs that the artificial-intelligence-investment boom is supercharging the U.S. economy and hoovering up capital that might otherwise find its way into the government bond market.
-Joseph Adinolfi