Trump's decision to drop Hassett has significantly reduced expectations for a Federal Reserve rate cut.

U.S. Treasury prices fell as Trump hinted at nominating someone other than National Economic Council Director Hassett to succeed Powell, with traders cutting their expectations for two U.S. rate cuts in 2026. The decline in U.S. Treasuries pushed the two-year yield up as much as 5 basis points to 3.61%, the highest level since the Fed's last rate cut in December. Short-term interest rate contracts reflected a decreased probability of two 25-basis-point rate cuts by the Fed this year after Trump's comments on Hassett. Meanwhile, the Treasury market continued to be troubled by the December jobs data released a week earlier, prompting Wall Street banks that had previously predicted a rate cut at the Fed's next meeting on January 28 to abandon that view. Morgan inflation economists predict that despite the change in Fed leadership, the Fed will not cut rates further. John Fath, managing partner of BTG Pactual Asset Management U.S., said, "The previous trade was betting that whoever becomes the next Fed chairman will be dovish. That has reversed in the last few days." (Jinshi)