Kevin Hassett, chairman of the White House National Economic Council (NEC), has recently emerged as one of the leading candidates to become the next head of the US Federal Reserve Board (FRB).
Currently, Donald Trump is expected to announce his Fed presidential candidate in early 2026, but the market is focused on the Fed’s interest rate decision in December.
Markets are pricing in a 25 basis point rate cut as the Fed prepares to announce its December rate decision without any key data.
According to CME FEDWatchToll data, 87% of the Fed is pricing in a 25 basis point rate cut in December, while only 13% is pricing in keeping rates unchanged.
As of now, Delphi Digital has predicted in its latest post that the Fed will cut rates by another 25 basis points in December, bringing the federal funds rate to around 3.50% to 3.75%.
Analysts at Delphi Digital expect the forward curve to see at least three more rate cuts in 2026, with rates below 3% by year-end.
Analysts also said that the end of QT on December 1, the decline in non-performing loans and the complete depletion of suggested retail prices will create a positive net liquidity environment for the first time since early 2022, changing policy from negative to positive in 2026.
The Fed’s interest rate path next year is the clearest it has been in years. Another 25 basis point rate cut is expected in December 2025, which would push the federal funds rate to around 3.5% to 3.75%. The forward curve predicts at least three more rate cuts in 2026, which would bring rates below 3% by the end of the year.
But rate cuts are only part of the picture. The QT period ends on December 1st. Bad debts will be written down rather than replenished. RRP is completely exhausted. All of this combines to create a net positive liquidity environment for the first time since early 2022.
*This is not investment advice.
