Top News

• Goldman Sachs' chief US economist says the forthcoming Fed monetary policy review is “likely to be uneventful.”
• Inflation and job growth have steadied, signaling a healthier macroeconomic picture.
• Investors are watching geopolitical developments, particularly those related to Greenland and Europe, ahead of a busy earnings week.

Goldman Sachs expects the Federal Reserve to keep interest rates steady and make only minor changes to its monetary policy stance at its mid-week review meeting.

Goldman Sachs Chief U.S. Economist David Mericle expects two rate cuts this year, starting with one in June, according to his investor note reported in The Fly. The central bank cut rates three times last year – in September, October, and December – to reach the current 3.50%–3.75% range, signaling monetary easing amid slowing labor market growth and softer economic data.

Mericle said Fed Chair Jerome Powell is expected to emphasize that the recent rate cuts should help stabilize the labor market, with the central bank now well positioned to assess their impact. The Fed will announce its review on Wednesday afternoon. 

Goldman’s view largely aligns with that of other economists and research firms. Barclays expects a rate cut in the middle of the year, while Macquarie forecasts the first for the year to come in December. J.P. Morgan withdrew its outlook for a January rate cut, forecasting the Fed's next move as a 25-basis-point rate hike in the third quarter of 2027.

Data on Friday showed U.S. employment growth slowed more than expected in December. However, a decline in the unemployment rate to 4.4% and solid wage growth suggested the labor market was not rapidly deteriorating, boosting expectations that the central bank will leave borrowing costs unchanged at its January meeting, Reuters reported.

U.S. inflation rose 2.7% in the 12 months through December, matching November’s gains and in line with economists’ expectations.

Any news about Powell’s successor will also have a bearing on the market, with Rick Rieder, BlackRock's Chief Investment Officer of Global Fixed Income, floating as a potential candidate for the role. U.S. President Donald Trump has repeatedly indicated that he wants Powell to leave the post; Powell’s term ends in May, and a successor would likely be named much before that. 

Meanwhile, investors are clued into a string of geopolitical developments. Trump is pushing ahead for the U.S. takeover of Greenland, and has indicated intervention in Cuba and Iran – events that could has far reaching consequences for trade, oil, and diplomatic relations.

Trump also threatened 100% tariffs on Canada should it pursue a trade deal with China, indicating he’d continue using tariffs as a tool in trade and diplomatic negotiations. By Sunday evening, U.S. futures were pointing lower, while gold and silver prices hit a fresh record.

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