Analysis: If Rick Rieder becomes the new Federal Reserve Chairman, there may be three interest rate cuts this year

As a seasoned Wall Street professional, Rick Rieder is seen as bringing a market-focused approach to the Federal Reserve. Last September, he advocated for a more aggressive 50 basis point rate cut, rather than the 25 basis point gradual pace favored by the Fed at the time. At the same time, he opposed the central bank's forward guidance on future interest rate movements, known as the "dot plot."

Economists at Evercore ISI, including Krishna Guha, wrote earlier this week, "He will hold a dovish rate stance and may advocate for three rate cuts this year."

Currently, the interest rate swap market is pricing in less than two 25 basis point cuts by 2026. However, in the SOFR options market, there has been a surge of positions that would benefit from multiple rate cuts, targeting a federal funds rate as low as 1.5% by the end of this year, well below the current interest rate swap market pricing of about 3.2%.