Why a more docile Fed is key to peace with Russia and the global order

Everything is connected. Monetary policy, wars, presidential campaigns and markets. Sometimes the relationship is obvious. Other times it is hidden behind a numbera loose phrase in an interview or a decision that seems technical but, in reality, changes everything. Like the possible replacement of Jerome Powell as head of the Federal Reserve (Fed). Like the candidacy of Kevin Hassett. Like the calendar that points to December and peace, the word that begins to sneak into the offices of Washington.

At first glance it seems like a domestic story. A president who does not want to renew the current head of the central bank. A favorite that grows with each passing day. A Treasury Secretary who accelerates contacts with the media. But behind the spotlight, few doubt that many more interests are at work. What is at stake is not just who will set interest rates. What is being negotiated in parallel is a new global mapwith Ukraine, Russia and the United States sitting at a table that, curiously, also depends on money.

Trump knows it. Your team too. That is why the Fed has gone from being a technical actor to becoming another cog in its geopolitical strategy. A Fed that lowers rates quickly, that provides liquidity and that stops curbing public spending, is a Fed that frees up space.

And it’s not just a metaphor. Each rate cut reduces the cost of the $34 trillion of debt carried by the Treasury. Only in 2025, interest payments exceed 870,000 million dollarsaccording to data from the United States Congressional Budget Office. A decline of just 25 basis points can mean tens of billions in budget savings. More fiscal space, less political pressure.

In fact, the United States is entering unprecedented territory. According to the latest IMF projections, its public debt could reach 143% of GDP in the coming years, exceeding the levels traditionally associated with fiscal crises such as Italy or Greece. But it is not only a fiscal issue, but also a diplomatic one. If we have to rebuild, let there be money. If incentives have to be negotiated, let the credit flow. If we have to win the elections, let the economy grow.

Between 2022 and 2025, the United States has committed more than $113 billion in aid to Ukraine, according to the Congressional Research Service. If the conflict moves towards peace, that flow could be converted into reconstruction. And an expansive monetary policy would facilitate this shift without the need for new fiscal adjustments..

Scott Bessent, US Treasury Secretary, has let it fall his way. In his opinion, the Fed should return to the background. That is no longer the time for monetary prominence. That we need to calm down. And he did it right after confirming that Trump plans to announce Powell’s successor before Christmas. The date is not coincidental. Not even the message. Not only is the future of the central bank on the president’s agenda.

Bloomberg has reported that Washington is advancing a 28-point draft to end the conflict between Ukraine and Russia. It’s not official. It doesn’t seem like something definitive either, but it is real. Of those 28 points, 9 have already come off paper. And what remains is being renegotiated with a mix of urgency and caution. And a ceasefire agreement, even if provisional, can become its most powerful card.

The market begins to discount a peace agreement in Ukraine

“These days it has positively influenced the tone of the market based on expectations regarding a 28-point proposal for peace in Ukraine in a conflict in which Trump has committed a not insignificant part of his eccentric political capital,” they point out in Bankinter.

In recent weeks, the market has already gotten ahead of itself. The odds of a new Fed rate cut in December have gone from 50% to 84%, according to FedWatch data. Wall Street celebrates it. The Nasdaq has rebounded. The S&P 500 also with a weekly gain of over 2.5%. FOMO is back and technology is leading the party.

But if there is an even more reliable indicator, it is oil. The price of Brent has fallen nearly 3% in the last week to the level of $62.7, marking its worst week since October. Futures already seem to discount a possible ceasefire between Russia and Ukraine, and with it, a relaxation of energy sanctions that could flood the crude oil market.

But not everything is economic optimism. It is also a political bet. Investors believe the turnaround is underway. That the Fed is preparing to adapt to the new cycle. And that this cycle, unlike the previous one, no longer revolves solely around controlling inflation, but rather facilitating a geopolitical transition.

The economist Trump wants at the Fed to reinforce his global plan

On that board, Kevin Hassett fits as a piece that had already been designed for years. It is not a outsider. He was director of the White House National Economic Council, is an economist close to the Republican Party and has been an advisor in the campaigns of figures such as McCain, Bush and Romney. He also worked for years as a senior economist at the Fed itself. Therefore, he knows the institution inside and, above all, he knows Trump’s style well.

Just a few days ago he wrote his letter of introduction. In an interview with Bloomberg, he stated that rates should go down now. That the data justify it. Who is ready to take office without a learning curve. And that, ultimately, is not going to get in the way of the president’s plans.

That profile is not only liked in the White House. It also reassures those who are negotiating in parallel with Moscow and kyiv. Because a Fed aligned with the Executive can become an invisible ally. Not at the dialogue table, but in the conditions that are needed for that table to function. If the dollar relaxes, emerging markets breathe. If rates go down, the cost of financing foreign aid goes down. If the economy heats up just before the election cycle, America’s bargaining power multiplies.

It is no coincidence that the change at the Fed coincides with the greatest diplomatic activity in months. And the new president is not going to play at institutional independence. It will play in favor of the general plan.