- Goldman Sachs expects a potential Fed chair change, such as Kevin Warsh, would not accelerate rate cuts.
- A divided FOMC limits a new chair's influence on policy direction.
- Goldman still forecasts two 25-basis-point cuts later this year, likely in September and December.
Policy Path Hinges on Consensus
Goldman Sachs economist David Mericle said that a leadership change at the Federal Reserve, possibly replacing Jerome Powell with Kevin Warsh, would not quickly alter monetary policy. "A new chair may have limited influence if the Federal Open Market Committee remains divided," Mericle noted, adding that Warsh may not be more inclined to cut rates than Powell, especially amid Middle East uncertainty.
Data-Dependent Outlook
Goldman maintains its forecast for two 25-basis-point rate cuts in 2026, likely in September and December, based on cooling inflation and softening labor demand. The firm previously delayed its easing timeline in response to weaker payrolls, emphasizing a data-dependent approach. "Without broad committee support, a chair alone rarely dictates the trajectory," Mericle said.
Market Implications
Investors should watch for payrolls, inflation metrics, and geopolitical developments to gauge timing. A slower easing cycle could keep borrowing costs elevated for consumers and businesses, affecting housing and investment. Markets may adjust portfolios toward longer-duration assets or rates-sensitive equities based on anticipated policy paths.
Correction: An earlier version of this article incorrectly stated the year of the projected cuts; they are expected in 2026, not 2025.