My advice to Kevin Warsh — not that he asked for it — is to tell Donald Trump the truth about near-term rate cuts: They aren’t coming in the absence of a left-tail shock that puts a US recession on the table.

Even if Warsh could herd enough cats on the Committee to get a cut before September (a virtually impossible task based on three hawkish forward guidance dissents in April and Jerome Powell’s lingering presence on the Fed board), the optics would be so poor in the context of the outlook for inflation that the Committee would risk piling even more pressure on the long-end of the Treasury curve.

Of course, a lot can happen between now and June 17, to say nothing of July 29, but to reiterate: It’s very difficult to see a scenario where the macro picture shifts enough to warrant the “day one” rate cuts Trump wants from Warsh. Even if the standoff with Iran’s resolved tomorrow, it’ll be months before the impact of the supply shock fades from the data.

Markets were still priced for better-than-even odds of a Fed hike this year as of Tuesday morning, but tellingly, the May installment of BofA’s Global Fund Manager poll found just 17% of respondents expect a hike from Warsh over the next 12 months. And that’s actually up a lot from April, which is to say 17% counts as high.

Remember: The trio of quasi-dissents in the April FOMC statement all argued for the introduction of explicit two-way risk into the forward guidance. In other words, the dissenters wanted the Fed to make it clear, or at least clearer than it was previously, that the next move in rates could be a hike.

That was the first time the Fed acknowledged the self-evident: That the statement language around the outlook for rates implicitly reflected an easing bias. Three voters (and who knows how many meeting participants) wanted that easing bias dropped in April.

Warsh will have to contend with that, a Powell who, while not in favor of a return to hikes, certainly won’t support a resumption of cuts barring a dramatic turn for the macro worst, as well as labor market and inflation figures which simply don’t support the case for lower rates.

In the same BofA survey, expectations for higher short-term rates globally soared.

There’s the chart. Thanks largely to the war, we’ve gone from a net 4% expecting higher short-end rates over the next 12 months to a net 23%, the highest since October of 2022 (i.e., since “peak hawks”).

As the same figure shows, the inflation outlook’s deteriorated meaningfully, with a net 66% expecting higher CPI readouts globally.

Some of the incongruity between professional investor expectations for Fed cuts (50% still see a cut this year from Warsh) and global hikes can be attributed to the contrast between the Fed’s dual mandate and other DM central banks’ inflation-centric remits.

But some (a lot?) of the disparity likely reflects the fact that Warsh is seen by some as partially (unavoidably) beholden to Trump. Not in the same way Kevin Hassett would be, of course. I do believe Warsh when he says he doesn’t intend to be a lackey.

But I think Warsh will quickly discover that his latitude for discretionary decision-making is much narrower than he imagined, even in the context of what he surely realizes is limited space for institutional independence.

In the editorial accompanying the BofA poll, Hartnett said one “vulnerability” to the risk-on bull case is a “behind-the-curve” Fed. Notably, 62% of survey panelists are “targeting 6% on 30-year Treasury yields,” he remarked, compared to just 20% targeting 4%.

“The ability of US equities to withstand the current bearish move in Treasurys is the true litmus test of the bond selloff,” BMO’s Ian Lyngen wrote on Tuesday. “All else equal, we suspect that if and when 30-year rates manage to reach 5.25% in the next few weeks, there will be a more durable pullback in equity valuations.”