When U.S. President Donald Trump replaces the Federal Reserve Chair after Jerome Powell's term ends in May 2026, adjustments to U.S. monetary policy may occur, prompting rate traders to seek profit opportunities.
This has already been reflected in this week's secured overnight financing rate (SOFR) futures — the main way traders bet on changes in Federal Reserve policy rates. The strategy of heavily selling the March 2026 contract while buying the June 2026 contract constitutes a bet that the Federal Reserve will cut rates during this period.
The trading volume of the spread between these two contracts exceeded 60,000 on Thursday, marking the second-highest on record; the highest trading volume record was set on April 9 — the day Trump decided to suspend tariffs on certain trading partners, triggering wild fluctuations in the U.S. financial markets. The increase in open contracts for this CME Group product indicates that traders are opening new positions rather than closing old ones.
Federal Reserve policymakers hold eight routine meetings a year to set the target range for the federal funds rate, and SOFR closely tracks that range. The last meeting of Powell's current term is scheduled for April 28-29. The next meeting will be on June 16-17.
The reason the outside world speculates that Powell's successor will immediately cut interest rates upon taking office is that Trump has been criticizing Powell for not cutting rates yet. Trump stated in April that the end of Powell's term is 'the sooner the better.'