Alright, let’s get straight to the point. As the change in leadership at the Federal Reserve approaches, the atmosphere in Washington has become genuinely explosive. There is a criminal investigation into Jerome Powell by the U.S. Department of Justice, senators are blocking procedures, political bargaining is happening behind the scenes, and the appointment of Kevin Warsh is literally up in the air.
Senator Thom Tillis made it clear that he will not allow the confirmation process to move forward while an active investigation exists. “We need an independent Fed,” he said. In essence, he sent the message that either the investigation proceeds seriously and credibly, or it closes and the process moves on. There is no political smoothing over. There is no middle ground.
There was even a proposal to move the case from the Justice Department to the Senate Banking Committee, removing the threat of criminal prosecution while continuing some form of oversight. Tillis was explicit: “We do oversight, not prosecutions.” In other words, either there is a serious case or the matter ends. Until that is clarified, Warsh does not move forward.
In short, this leadership transition is not a routine institutional change. It is a high level political confrontation. And when the independence of the Federal Reserve is questioned, markets start to sweat. If the central bank is perceived as politically controlled, the entire framework shifts.
And as if that were not enough, there is no agreement on what happens next with interest rates.
THE CONSERVATIVE VIEW
Let’s start from the beginning.
Former Fed Vice Chair Roger Ferguson made a simple but important point: the data do not justify aggressive rate cuts. Unemployment stands at 4.3 percent. The labor market remains strong, and job creation is largely concentrated in the private sector.
The economy continues to expand, GDP is holding up, and equities are trading near highs. Inflation, however, remains sticky.
Markets once expected aggressive cuts as early as March. Now, the probability of an immediate cut has almost disappeared, and expectations for June have also declined significantly. In Ferguson’s view, we might see one more cut followed by a pause. That is it. Wait and see.
He also clarified something crucial. The Federal Reserve is not there to “fix” technological changes like artificial intelligence. It is not there to solve structural labor market issues. Its role is to manage aggregate demand. If the economy is running well, cutting rates simply because there is a productivity narrative could be a mistake.
THE OPPOSING VIEW
Then comes David Einhorn and turns the debate upside down.
The founder of Greenlight Capital argues that the market is making a massive mistake. He believes the Federal Reserve will cut rates far more than currently priced in. When asked how many cuts he expects, he answered, “a whole bunch of times.”
In other words, many. Significantly more than two.
And this is not just theory. His fund has taken a large position in SOFR futures, betting on a much more aggressive easing cycle. As he noted, that trade paid off last year. This is not just an opinion. It is capital at work.
Why is he so confident? He sees political pressure. He sees Donald Trump stating that the United States should have the lowest interest rates in the world. He sees new leadership. He believes Warsh will argue for lower rates, possibly using the narrative of higher productivity driven by AI to persuade other committee members.
At the same time, he is raising concerns about fiscal policy. A deficit close to 6 percent of GDP alongside near full employment. For him, that mix is not sustainable over time without looser monetary policy. He connects all of this to the broader discussion about the long term stability of the dollar and the growing role of gold.
THE GOLDMAN VIEW
As if the disagreement between “one and done” and “cut aggressively” were not enough, Goldman Sachs enters the picture.
Jonny Fine, head of investment grade credit, forecasts four rate cuts this year. The first in June, with the rest later in the year, essentially toward the final months.
Why such a dovish stance? Once again, leadership change. He believes that under Warsh, the Federal Reserve would act more preemptively, more anticipatory. In other words, it would not wait for something in the economy to break before responding. It would move earlier.
Meanwhile, something massive is happening on the corporate side. Major technology companies are sharply increasing capital expenditures. Within two weeks, capex estimates rose by 120 to 150 billion dollars. Oracle Corporation is planning to raise up to 50 billion dollars through debt and equity, with record interest in its bond issuance. Alphabet Inc. issued a 100 year bond, the first of its kind in the tech sector in decades.
According to Goldman Sachs, all of this signals that companies are anticipating something.
INVESTMENT TAKEAWAY
So what do we have in the end?
