The Fed Chair transition has begun! Trump aims to reshape monetary policy, and Morgan Stanley predicts a rate cut in September.

U.S. Treasury Secretary Scott Basset confirmed that the selection interviews for Fed Chair Powell's successor will begin after Labor Day, with 11 candidates currently shortlisted. Meanwhile, Powell emphasized employment market risks for the first time at the Jackson Hole Central Bank annual meeting, suggesting that monetary policy may shift. Major banks like Morgan Stanley and Barclays subsequently predicted that the Fed will start cutting interest rates in September. Market expectations are intertwined with political trends, and U.S. monetary policy is facing a significant turning point.

[Powell Chairmanship Replacement Process Initiated, 11 Candidates Shortlisted]

U.S. Treasury Secretary Becerra stated on Monday that the Treasury Department will meet with President Trump after Labor Day in September to discuss candidates for the successor to the Fed Chairman, ultimately narrowing down to 3 to 4 candidates for the President's decision. Becerra described the candidate list as "strong," emphasizing that the new Chairman must be an expert in monetary and regulatory policy, capable of effectively leading the large institution that is the Fed.

Powell's term will end in May 2026. Although Trump cannot replace him early due to policy differences, the administration has clearly stated its intention to appoint new leadership after Powell's term ends. This move stems from long-standing disagreements over monetary policy, with Trump publicly criticizing Powell multiple times for keeping borrowing costs too high.

[Trump's monetary policy stance is clear, aiming to push the Fed towards interest rate cuts and deregulation]

Beisente pointed out that although Trump respects the independence of the Fed, he believes it has "lost its way" and needs new leadership that aligns with government policy priorities, specifically lowering interest rates, restoring credibility, and reshaping the regulatory framework. This stance has begun to influence the structure of the Fed's committee, as Trump recently announced plans to replace board member Lisa Cook and nominated Stephen Milan to take over, which is seen as an important step towards pushing the committee towards a more dovish stance.

The market is highly focused on the upcoming leadership transition, with prediction platform Polymarket indicating that the probability of Trump announcing a replacement for Powell by the end of the year is currently 64%.

[Powell's change in attitude, Morgan Stanley joins the September rate cut prediction camp]

The Fed's monetary policy direction has undergone significant changes recently. Powell's speech at the Jackson Hole annual meeting pointed out for the first time that a weakening labor market could lead to a shift in monetary policy, citing the addition of only 73,000 jobs in July (less than half of expectations) and the downward revisions of data from the previous two months as the basis. Although he also warned that Trump's tariff policy is pushing up prices, the overall focus of his statements has shifted more towards protecting jobs rather than combating inflation.

This shift has prompted several institutions to adjust their forecasts. Morgan Stanley released a report on Monday, predicting that the Fed will cut rates by 25 basis points in September and December, followed by quarterly rate cuts, bringing the rate down to 2.75%-3.0% by 2026. Barclays, BNP Paribas, and Deutsche Bank have also joined the ranks of those predicting a rate cut in September. According to LSEG data, the market is currently pricing in an 81.9% probability of a rate cut in September.

[Conclusion: The change in policy and the political transition have increased market volatility risks]

The leadership transition at the Fed is intertwining with a potential rate-cutting cycle, bringing unprecedented uncertainty to the market. On one hand, if Trump successfully implements his low-interest rate and deregulation agenda, it could change the long-term policy framework of the Fed; on the other hand, Powell's shift to a dovish stance or an early rate cut could also boost risk assets, including cryptocurrencies. Investors should pay attention to the September FOMC meeting decision and the subsequent personnel changes in Trump's team to prepare for possible market fluctuations.