UOB strategists Suan Teck Kin and Alvin Liew have analyzed the potential impact of Kevin Warsh assuming the role of Federal Reserve Chair on U.S. monetary policy and the Fed funds rate. They anticipate that the Federal Open Market Committee (FOMC) will maintain a cautious approach, with no abrupt policy changes expected in the near term due to the FOMC consensus and the upcoming May leadership transition. The strategists forecast a pause in rate changes through early 2026, including the April FOMC meeting, which is likely to be the final meeting for current Chair Jerome Powell [1].
According to UOB, two rate cuts are expected in June and the third quarter of 2026, which would bring the Fed Funds Target Rate (FFTR) down to 3.25% by the end of 2026. This outlook is supported by futures market pricing, which implies an approximate 10 basis point reduction in the Fed funds rate by December 2026, resulting in an implied rate of 3.54% at year-end. The strategists emphasize that this represents a modest and gradual easing path, rather than an aggressive policy shift [1].
UOB also notes that risks to this outlook include higher energy prices and softness in the labor market. They expect more visible weakness in the labor market and consumer spending to emerge in the coming months, which could further influence the Fed's policy trajectory. The overall expectation is for a period of pause followed by gradual rate reductions, consistent with a normalization path for monetary policy [1].
CONCLUSION
UOB strategists foresee a cautious and gradual easing of U.S. monetary policy under a potential Warsh Fed chairmanship, with two rate cuts expected in 2026 and a terminal FFTR of 3.25% by year-end. Market pricing and economic risks support this modest approach, suggesting limited immediate market disruption.