Prediction signal lower inflation if Hassett Fed chair

Prediction markets are gradually rewarding the possibility of Kevin Hassett becoming the next Federal Reserve chairman by associating his possible nomination with a forecast of reduced inflation

ContentsYields in the treasury respond to the ascension of HassettExpectation and inflation prospects in the marketThe traders seem to be reacting to the fact that Hassett is a proponent of rate cuts and pro-growth policies.

A former senior advisor to Donald Trump, Jason Miller, emphasized that although the president has not officially announced it, the markets are already showing the possibility of making Hassett the position. He presented a Kalshi chart in which Hassett odds increased, and inflation prices were softening, which illustrates how traders are changing their expectations.

Source*: Jason Miller/X*

Hassett, the incumbent director at the National Economic Council, shot ahead of other rumored candidates in the last week. According to Polymarket information, his probability shot up by an estimated 30% at the close of November to 73% by Friday. During his latest visit to the White House, Trump seemed to recognize the candidacy of Hassett, referring to him as a respected leader.

Yields in the treasury respond to the ascension of Hassett

The bond markets reacted fast as Hassett became a favorite. On the one hand, he appeared in the lead of the race on Tuesday, which was reported by Bloomberg, and since then, the 10-year Treasury yield has increased by 14 basis points. The investors are factoring in the risk of accelerating inflation in case rate cuts are done too aggressively.

According to Michael Brown, a senior research strategist at Pepperstone, the influence that Hassett has in the market has often been due to his loyalty to Trump. The currency markets as also responded, as the U.S Dollar Index fell by 99 to 98, as it was not clear despite the surge in treasury yields, and this is the dollar booster.

Chief bond strategist at BCA Research, Ryan Swift, recommended that traders should think of Treasury curve steepeners because the yields might keep ascending in 2026. The weaker dollar and higher yields reflect investors’ expectations for the broader markets under a Fed led by Hassett.

Expectation and inflation prospects in the market

Other analysts interpret the appointment of Hassett as an indicator that inflation may persist beyond the Fed’s target. Art Hogan, the chief market strategist at B. Riley Wealth Management, said that investors are also evaluating the whole situation and anticipate that inflation readings will remain high in the coming months.

Nevertheless, the Federal Open Market Committee might be restricted by structural constraints on quick changes in policy. The chair has but a single vote out of twelve, so that Hassett would require the goodwill of other members, of whom most are more hawkish. Presidential support may not be easy to push to make significant or quick rate cuts.

Market responses indicate a cautious attitude toward possible changes in the current Fed policy. The inflation trends and Treasury moves are the focus of investors who are keen on the choice of a new Fed chair, since it might have a substantial impact on economic expectations and trading strategies in the coming year.