Fed: Gradual easing path under Warsh – UOB
UOB strategists Suan Teck Kin and Alvin Liew assess how a potential Kevin Warsh Fed chairmanship could shape United States (US) monetary policy and the Fed funds rate. They expect a pause through early 2026, then two cuts in June and 3Q, taking the Fed Funds Target Rate (FFTR) to 3.25% by end-2026, with risks from higher energy prices and labour softness.
UOB outlines cautious easing trajectory
"Expect gradual change, not shock therapy: FOMC consensus and the May leadership transition constrain abrupt policy shifts in the near term. Futures market is pricing in about 10bps cut to the Fed funds rate by Dec 2026. On our part, we still expect a Fed pause in early 2026 (including Apr FOMC), then two rate cuts in Jun and 3Q, taking FFTR to 3.25%."
"Where does this leave the Fed funds rate in the over 6 to 12 months? For the next FOMC meeting (30 Apr), financial markets and we do not expect any change to the current Fed funds rate of 3.5-3.75%, which is likely to be the final meeting for current Chair Jerome Powell."
"Over the next 6-9 months’ horizon, futures markets are pricing in an implied Fed funds rate of 3.54% at end-Dec 2026, meaning a cumulative rate reduction of approximately 10bps, i.e. a modest, gradual easing path rather than an aggressive one."
"As such, we continue to expect a period of pause (including the Apr FOMC) followed by two rate reductions in Jun and 3Q26, with the expectations for more visible weakness in the labour market and consumer spending to emerge in the months ahead."
"This would bring the terminal FFTR to 3.25% by year-end 2026, consistent with our view of a gradual normalization path."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Natural gas pipeline delays threaten the progress of AI data center projects! Oracle (ORCL.US) resorts to the "trucking gas" strategy to ensure power supply
Oracle (ORCL.US) is adopting a novel power supply strategy—transporting natural gas directly to server campuses by truck—to ensure that multiple data center projects progress as planned.
U.S. budget deficit soars to nearly $2 trillion, exceeding 6% of GDP; high interest rates and tax cuts further worsen the deficit
The US budget deficit for fiscal year 2026 has risen to $1.993 trillion, a year-on-year increase of 12%, marking the highest level since 2021 and projected to account for over 6% of GDP. High interest rates have pushed net interest payments to over $1.1 trillion, accounting for more than half of the deficit increase; lower-than-expected tax and tariff revenues have further worsened the financial shortfall. With just weeks left before the midterm elections, neither party intends to implement substantial fiscal consolidation, and the deficit outlook is highly dependent on the election results.
To deliver computing power, Oracle uses trucks to transport natural gas to power its data centers
To address pipeline delays in AI data center construction, Oracle has adopted an unconventional energy supply method by transporting compressed natural gas via trucks, which has already been implemented in Utah and Texas, and is also being considered for the "Project Jupiter" in New Mexico. However, this solution costs four times as much as pipeline natural gas and is limited in scale, covering only a small fraction of the project's total capacity.
Aptos insider vesting ends, cutting APT unlocks by 60%
Crypto prices
More
