Gold scales new record high on Iranian concerns; silver climbs above $90/oz
Wolfe Research outlines eight risks that could spark stock declines in 2026
This sector is ’poised for a big, beautiful year’: Truist
We told you first: These two AI-picked stocks are already up 60%+ this month
Investing.com - The Federal Reserve is expected to slash interest rates one more time before current Chair Jerome Powell’s tenure ends in May, according to analysts at Wells Fargo.
In a note to clients, the strategists predicted that a 25-basis point drawdown would come before Powell steps down, finishing an eight-year run at the helm of the world’s most influence central bank.
Another equally-sized rate reduction is then projected to be rolled out this summer, with a new Chair at the head of the Fed’s Board of Governors.
The comments from Wells Fargo come after the Trump administration launched a criminal investigation into Powell, a move the Fed Chair said was a "pretext" to sway interest rate policy. President Donald Trump has frequently badgered and criticized Powell and the Fed for not aggressively cutting rates, even after the central bank rolled out multiple drawdowns last year in a bid to support a weakening labor market.
Concerns around the Fed’s ability to set interest rates free of political influence, long seen as a bedrock feature of the American financial system, have been raised following the start of the investigation into Powell.
Some investors have wondered whether Trump will also look to appoint a loyalist as Powell’s replacement.
Against this backdrop, uncertainty has clouded over the path ahead for Fed interest rates. According to CME FedWatch, the central bank is tipped to keep rates steady at its next meeting later this month, but unveil two more cuts some time this year. When exactly those reductions would be announced remains unclear, however.
"The broader FOMC has been divided in recent months about the appropriate stance of monetary policy, while the recent Department of Justice subpoenas to the central bank further increase the scrutiny and pressure on U.S. monetary policymakers," the Wells Fargo analysts said.
They added that the most recent labor data "continue to point to a jobs market that is modestly on the wrong side of full employment," referring to one of the Fed’s two core mandates, along with maintaining price stability.
Other figures have also pointed to a softening labor picture, with employers are neither hiring nor firing workers. Inflation data earlier this week, meanwhile, showed underlying price growth easing in December.
"Thus, we see scope for the [rate-setting Federal Open Market Committee] to continue to nudge the federal funds rate toward neutral in the coming months," the Wells Fargo analysts said.
