Wall Street Braces for Warsh Era: Rate Cut Forecasts Hold Steady Amid Fed Leadership Speculation

Wall Street's leading economists are signaling that the Federal Reserve's interest rate trajectory may remain on course, even as President Donald Trump taps former Fed governor Kevin Warsh—a known inflation hawk—to potentially succeed Jerome Powell as Chair.

In notes to clients this week, both Barclays and Morgan Stanley reaffirmed their base-case forecasts for two additional rate cuts this year, following the January meeting where policymakers held steady. The consensus suggests that despite Warsh's historical skepticism toward loose monetary policy, the institutional dynamics of the Fed and current economic data will likely guide near-term decisions.

"We see limited scope for immediate disruption," wrote Barclays analyst Marc Giannoni, pointing to a divided Federal Open Market Committee (FOMC) that has shown resistance to aggressive easing amid solid economic growth and elevated inflation readings. Giannoni projects cuts in June and December, assuming Warsh is confirmed by mid-May.

Morgan Stanley's chief economist echoed that view, noting that operational continuity at the central bank is expected, "particularly in the near-term." Lower interest rates typically stimulate borrowing and spending, a lever the Fed has used to cushion economic slowdowns.

Warsh, 55, built his reputation advocating for tighter monetary policy and a reduced Fed balance sheet. His past critiques of the Fed's inflation management have drawn attention, yet analysts believe the committee's collective stance and lingering inflation concerns will temper any swift pivot.

Confirmation is far from assured, however. Republican Senator Thom Tillis has vowed to block all Fed nominations until the Justice Department concludes its probe into Chair Powell, potentially delaying Warsh's appointment for months.

Michael Torres, Portfolio Manager at Horizon Capital: "The market is pricing in continuity, not revolution. Warsh is pragmatic—he knows you can't ignore the data. The June cut is still very much in play."

Dr. Lena Chen, Economic Historian at Carnegie Institute: "This nomination reflects a long-standing ideological push for harder money, but the Fed's institutional inertia is powerful. The real test will come during the next crisis."

Rick Dalton, host of 'Moneytalk' podcast: "It's pure theater. Trump wants a yes-man at the Fed before the election. Warsh's hawkish record is being whitewashed—this is about political control, not sound economics."

Priya Sharma, Senior Economist at Midwest Bank: "The confirmation delay creates uncertainty, but the FOMC has a roadmap. Inflation remains the key variable; if it dips, the cuts will proceed regardless of the chair."