Trump: Hopes for rate cuts but “leaves it to Huaxu to decide”! Inflation at 3.8%, non-farm doubled, with 96% betting on a rate hike by year-end

Today, U.S. President Trump, aboard Air Force One, said he would “hand over” the power to make interest-rate decisions to the Federal Reserve Chair, Kevin Warsh, and added that he does not mind Warsh cutting rates in October. But the economic data tells a different story: in April, inflation surged to 3.8%, the highest in three years; in May, non-farm employment of 172,000 beat expectations by double; and the bond market already assigns a 96% probability to rate hikes by year-end.
(Background: Kevin Warsh was sworn in as Fed Chair at the White House! Trump: Please maintain absolute independence)
(Additional context: The Fed kept rates unchanged at 3.5-3.75% for two straight “hold” meetings! Dot plot revises 2026 inflation and GDP)

Table of Contents

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• Trump’s Air Force One statement
• Data is broadly hawkish
• The bond market is all one-sided

Key Highlights

• On Air Force One, Trump said he would hand the interest-rate decision-making power to Warsh, and he does not mind a rate cut in October
• April CPI at 3.8% hits a three-year high; May non-farm employment at 172,000 is double expectations; rate-cutting room is nearly zero
• Bond market pricing at 96% probability of a rate hike by year-end; Yardeni expects one as early as July; the first rate cut may be delayed until September 2027

On Air Force One, Trump said the interest rate is “handed over to Fed Chair Warsh,” and the market reads it as “Trump is out of options, too.” With Warsh only two weeks into his term and 11 days until the first FOMC, traders are not waiting for a rate cut—they are waiting to see when he starts talking about rate hikes.

Trump’s Air Force One statement

Speaking aboard Air Force One today, Trump said he hopes to see interest rates lowered, but will hand the decision-making power on rates to Fed Chair Kevin Warsh. Trump said the country is doing well and markets should rise, and he emphasized that he does not mind Warsh lowering rates—leaving the rate-cut decision for the October meeting to Warsh to decide.

Trump also addressed Iran and the issue of oil prices, saying the United States has achieved major success on the Iran question, and that Iran currently lacks the conditions to possess nuclear weapons. On oil, he said the government has multiple options. In addition, Trump revealed he has arranged meetings with artificial intelligence companies, and they may visit the White House next week.

Data is broadly hawkish

However, the economic data Warsh takes over brings almost no room for rate cuts.

In April, the year-over-year rate of the Consumer Price Index (CPI) surged to 3.8%, the highest since May 2023, marking a three-year high. Core CPI reached 2.8%, and the Producer Price Index (PPI) rose 6% year over year, the largest increase since December 2022. Inflation is not only failing to move toward the 2% target—it is accelerating away from it.

The job market is also hot. The May non-farm employment report released by the U.S. Bureau of Labor Statistics on June 5 showed that 172,000 new jobs were added that month, more than double the Wall Street estimate of 85,000. March and April data were revised up to 214,000 and 179,000, respectively; combined, the two months were revised higher by 93,000 jobs. The unemployment rate was kept at 4.3%, with average hourly earnings up 0.3% month over month and up 3.4% year over year.

The April FOMC meeting minutes also leaked, pointing to a hawkish turn inside the Fed: most officials supported removing an easing bias, and most members believed that if inflation remains above 2%, rate hikes would be the appropriate choice. The minutes were released before Warsh took office, but the direction was already set.

The bond market is all one-sided

The bond market made up its mind before Warsh even made his comments.

At the first FOMC meeting on June 16 to 17, Polymarket saw more than $42 million bet on keeping rates unchanged, with a probability as high as 98%.

By December, CME FedWatch shows the probability that the federal funds rate will be above the current 3.50%-3.75% range has reached 96%. Sixty-one percent of traders are betting that the rate will be higher at the end of 2026, and the market expects the first rate cut to wait until September 2027.

Bond yields have already moved to reflect this in advance. The yield on the 30-year U.S. Treasury note broke above 5%; the 10-year touched 4.5%—the first time in a year; and the 2-year rose above 4% for the first time in 11 months.

Prominent strategist Ed Yardeni has become the first heavyweight on Wall Street to clearly call out a rate-hike timetable. He said on CNBC: “We expect the FOMC to raise rates in July.” The reason is that Warsh needs to use hawkish actions to reassure bond vigilantes, which in turn creates the chance to drive down long-end yields—achieving what Trump truly wants: lowering real borrowing costs.

Trump said “hand it over to Warsh,” but what he did not mention is that the economy Warsh inherits does not need rate-cutting medicine in the first place. With inflation at 3.8%, non-farm payrolls set to double, and bond market yields surging, every data point is pushing Warsh in the opposite direction. Trump’s concession may look generous, but in reality it is a way of acknowledging the situation. The question is not whether Warsh will raise rates—it’s how long he can delay doing so.

Frequently Asked Questions

Will the Fed raise rates in 2026?

According to CME FedWatch data, there is a 96% probability that the federal funds rate will be above the current 3.50%-3.75% range by year-end. Strategist Yardeni predicts the earliest rate hike could be as soon as July. The June FOMC is expected to keep rates unchanged, but the probability of a rate hike in October is 59%.

What is Trump’s stance on interest-rate policy?

On Air Force One, Trump said he hopes to cut rates, but he will hand the decision-making power to Fed Chair Kevin Warsh, saying he does not mind a rate cut in October. This move is interpreted by the market as political distancing—essentially preparing in advance to take the blame off the table for a potential rate hike.