Trump Says US Should Have the World's Lowest Interest Rates: What Do Prediction Markets Say?

President Donald Trump told reporters aboard Air Force One on Monday that the U.S. should have the lowest interest rate in the world.

He also called Federal Reserve Chairman Kevin Warsh “fantastic” while describing other board members as very political.

Citadel Securities expects Warsh to not follow the President’s wishes, calling for a quarter-point increase on Wednesday.

Head of macro strategy Frank Flight wrote that the move would reinforce Warsh’s pledge on price stability and end the forward guidance era.

Prediction Markets Are Less Convinced Than Wall Street Polymarket traders put the odds of a July hike at 21%, with no change at 79%.

Odds of a cut have collapsed below 1%.

The market has drawn over $111 million in volume.

Traders elsewhere have been more aggressive.

Interest-rate swaps implied roughly a 40% chance of a hike as of Monday, The Fed has held its target at 3.50% to 3.75% since December, including at Warsh’s first meeting in June.

Why a Surprise Hike Is on the Table Dallas Fed President Lorie Logan said this month that conditions call for modestly higher rates, while Cleveland’s Beth Hammack said inflation is too high with the labor market near full employment.

Both dissented in April against policy they viewed as too accommodative.

Warsh has said little about his own thinking, declining to submit dot plot projections and curtailing forward guidance.

Governor Christopher Waller has criticized that silence publicly, according to a Wall Street Journal report. “I’ve never seen a single theory that says you make people’s lives better or markets work better if you don’t tell people what you’re thinking," he said.

What It May Mean for Traders Credit is already tightening without Warsh’s help.

According to the Cato Institute, the 2-year Treasury yield has surged 62 basis points and the 30-year mortgage rate is up 45 basis points since December, even as the Fed’s target rate stayed flat.

A surprise hike may hit rate-sensitive names hardest.

For Rocket Companies (NYSE: RKT ), higher rates directly threaten both new loan and refinancing volumes, amplifying the pain of the jump in 30-year mortgage rates.

Homebuilders like D.R.

Horton (NYSE: DHI ) face parallel affordability headwinds as borrowing costs price out prospective buyers.

A rate hike would also rattle high-beta tech stocks, putting heavy pressure on the Invesco QQQ Trust (NASDAQ: QQQ ).

Trump has made clear what he wants.

Warsh, true to form, has not said whether he plans to give it to him.

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