Goldman Sachs has pushed back its forecast for the timing of U.S. interest rate cuts by one quarter, citing inflation's greater persistence than previously anticipated. The firm now expects the Federal Reserve to implement its next two rate cuts in December 2026 and March 2027. In a research note on Saturday, Goldman's U.S. economics team noted that, influenced by energy costs, U.S. PCE inflation is likely to hover around 3% throughout 2026—above the Fed's 2% target—delaying the conditions necessary for a policy pivot. However, the firm maintained its forecast for a terminal federal funds rate of 3%-3.25%.

The team suggested that for the Federal Open Market Committee (FOMC) to cut rates this year, "it would likely need to see a decline in monthly inflation data after oil price shocks subside and further softening in the labor market." At its most recent meeting in April, the FOMC held the policy rate steady at 3.50%-3.75%, citing uncertainty in the economic outlook for the U.S. and global economy due to geopolitical tensions in the Middle East.

**Warsh Takes Over from Powell: Can the New Chair Ignite Rate Cuts?**

As May 15, 2026, approaches, global financial markets are focused on Kevin Warsh, who is set to succeed Jerome Powell. While markets had previously held high hopes for the new chair, anticipating a more accommodative policy shift, the current economic environment presents significant hurdles for Warsh, who is viewed by markets as inclined toward rate cuts.

**The Resurgence of Sticky Inflation**

Warsh inherits a macroeconomic landscape where inflation expectations have once again veered off course. April's CPI is projected to jump to 3.8%, well above the Fed's long-term 2% target. For a new chair, a core component of professional credibility is a reputation as an "inflation fighter." With PCE inflation lingering around 3% and energy costs remaining elevated due to Middle East tensions, if Warsh were to cut rates hastily early in his tenure, it could easily be interpreted by markets as "surrendering to inflation." Should inflation expectations become unanchored, Warsh would face a more severe crisis of confidence than Powell did.

Wells Fargo noted that energy costs are permeating core consumption areas like food, creating a "structural stickiness" that requires Warsh to remain highly vigilant before pressing the rate-cut button.

**The Tug-of-War Between Trump's Fiscal Expansion and Monetary Policy**

Another major challenge for Warsh stems from the president who appointed him. The Trump administration's economic agenda—particularly its signature tariff policies and aggressive fiscal stimulus—is inherently highly inflationary. As Trump prepares to lead a delegation of corporate giants, including Nvidia and Apple, to Beijing, uncertainty around trade negotiations is rising again. Although a court ruled the 10% tariffs invalid, Trump's determination to use tariffs as a leverage tool remains unshaken.

For Warsh, this creates a classic policy conflict: the administration is pushing prices higher on the front end through tariffs and fiscal stimulus, while the Fed is expected to curb inflation on the back end by maintaining high interest rates. If Warsh aligns rate cuts with the fiscal pace, it could plunge the U.S. economy into a quagmire of "high inflation and high debt." If he insists on keeping rates high, it will inevitably lead to political friction with the White House.

**The Rate-Cut Button, Locked by Reality**

For the impending "Warsh era," investors must temper expectations of immediate monetary easing upon his appointment. Hamstrung by 3.8% inflation expectations, volatile energy costs, and the White House's aggressive trade policies, Warsh's rate-cut button is effectively "locked" by macroeconomic realities. After officially taking the oath of office on May 15, Warsh's most likely posture will not be one of "aggressive transformation" but of "extreme caution." As Goldman Sachs predicts, even this market-savvy chair, when confronted with the complex combination of oil price shocks and a labor market undergoing a soft landing, may have no choice but to postpone major rate-cutting plans until late 2026.