TLDR:
- Insight: Up to June 28, 2025, Deutsche Bank’s latest report sees the financial market pricing in very accommodative monetary policy under the new Federal Reserve chairman, particularly in Q3 2026, which they call the “new chairman premium,” although past precedent would suggest caution.
- Context: President Trump is considering nominating his successor to Jerome Powell, whose term ends in May 2026, as early as this summer in an attempt to influence market expectations ahead of time, as dovish signals from current Fed officials like Governors Bowman and Waller.
Deutsche Bank released a June 26, 2025, research note summarizing a dramatic shift in market Federal Reserve monetary policy expectations in the course of a year, that is, within the tenure of a new chairman. The report by Dong Jing explains a highly aggressive near-term easing pricing, namely the third quarter of 2026, coincidentally within the tenure of the new chairman. This “new chairman premium” deviates from recent historical experience and reflects the market’s anticipation of exceptionally accommodative policy.
Incumbent Federal Reserve Chairman Jerome Powell’s own term expires in May 2026, yet President Trump is contemplating nominating his successor as early as next summer, long before the customary three-to-four-month lead time, Wall Street sources informed Zenger. The move, the sources explained, is designed to allow the “shadow chairman” to begin to form market expectations as well as the course of monetary policy before Powell leaves office. The advance warning could potentially radically redefine investor attitudes and policy expectations.
Deutsche Bank’s statistical model, which is regressing rate cut expectations in the second, third, and fourth quarters of 2026 against the first quarter, is reflecting a large anomaly. Residuals, or observed minus estimated difference, have turned sharply negative, particularly for Q3 2026. This indicates that the market is presently adjusting for a larger degree of easing than has been anticipated historically throughout the new chairman’s tenure. But the report cautions that monetary policy requires a majority vote in the Federal Open Market Committee (FOMC), so policy change could be gradual rather than abrupt.
Dovish Fed commentary in recent times has helped drive such expectations. Fed Governor Michelle Bowman, on June 23, voiced approval for a July rate cut if inflationary pressures remain contained, referencing labor market risks and inflation’s gradual march towards the 2% goal. Governor Christopher Waller, in an interview with CNBC, was not opposed to cutting rates next month amid labor market worries. Such comments have gotten the market to price in a further 10 basis points of rate cuts later in the year, with FedWatch data indicating a 20.7% probability of a July cut, up from the previous week’s 12.5%, and a fully priced-in cut for September.
The aggressive market expectations for 2026 contrast with the typical conservatism regarding new chair changes. The Deutsche Bank analysis is that while the market is anticipating prolonged easing, the institutional limits of the FOMC are quite likely to temper any drastic policy changes. The “new chairman premium” is a positive bet on the potential for more accommodative policy under new leadership, perhaps because of Trump’s advance announcement approach.
Up to June 28, 2025, the crypto and financial markets eagerly tracked these developments. The possibility of a new Fed chairman and the concomitant policy easing has the potential to cascade through asset classes, even those like cryptocurrencies that are sensitive to monetary policy and tend to react accordingly. The “new chairman premium” effect, while speculative, reflects the market’s willingness to bet on change, even after previous history suggested a more measured approach. The coming several months will be crucial in determining whether these hopes are realized, or if the process of building consensus within the FOMC deflates the market’s optimism.
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