Many on Wall Street are puzzling over how far the Federal Reserve might cut interest rates this year. Hedge fund manager David Einhorn thinks the answer is simple: a lot further than anyone expects.
"I actually think the Fed is going to cut rates a lot more than what's priced this year," Greenlight Capital CEO David Einhorn told CNBC in a recent interview. When asked how many cuts he anticipated, he replied, "A whole bunch of times."
His outlook diverges sharply from current forecasts. The Federal Open Market Committee's December economic projections show the federal funds rate — the benchmark rate for overnight lending between banks — ranging between 2.1% and 3.9% in 2026, with a median estimate of 3.4%. That median implies only one modest 25-basis-point cut from the current target range of 3.50% to 3.75%.
Market pricing also shows little expectation of dramatic moves. The CME Group's FedWatch tool doesn't give a majority probability to even a quarter-point cut until June and a 50-basis-point reduction isn't fully priced in until September. By year's end, futures markets still don't reflect confidence in deeper cuts, and according to Chatham Financial's read of the Fed's dot plot, the median rate would remain above 3%.
Einhorn believes politics may shift that outlook. He argued that President Donald Trump, who has voiced frustration with the Fed's resistance to lower rates, is poised to exert greater influence over monetary policy.
"President Trump believes that the U.S. should have the lowest interest rate in the world," Einhorn said, adding that the businessman turned politican has long pressed for significant cuts.
Trump's pending appointment of Kevin Warsh as the next central bank chair could make that happen. With his confirmation viewed as nearly certain, Trump's selections would soon account for a majority of the Fed's Board of Governors — giving him sway not just over rate decisions but potentially even the leadership of regional Federal Reserve banks, as EconReporter has noted.
According to Einhorn, Warsh might justify deeper cuts by emphasizing productivity gains. In December, Trump told The Wall Street Journal he wanted the federal funds rate as low as 1% — or even below — declaring, "we should have the lowest rate in the world."
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