Quick Comment on Waller's Debut -- These Are the Key Points of the Fed Decision Highlighted by Goldman Sachs

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The first FOMC meeting presided over by Kevin Walsh at the Federal Reserve ended with no policy change, but his hawkish signals and a series of institutional reforms caught the market off guard, resulting in the largest single-meeting drop in stocks and the euro this year.

According to a post-meeting note from Goldman Sachs' FICC and Equities team, the core signal of this meeting lay in Walsh’s emphasis on “price stability” at the press conference, which directly triggered accelerated selloffs in equity and foreign exchange markets. The S&P 500 closed down 1.2%, and the euro fell 0.9%, both being the largest drops after any FOMC meeting this year.

The reaction in the interest rate futures market was also significant. Currently, the market has priced in two rate hikes before the first quarter of 2027, with a swift reassessment of the policy path after the meeting. Meanwhile, the dot plot showed 18 officials participating in the vote, with 9 suggesting a rate hike within 2026, while Walsh himself did not submit a forecast.

Statement Language Tightened, Hawkish Stance Emerges

Goldman Sachs reported that Walsh’s policy statement was noticeably shorter than his predecessor’s and highlighted “price stability” as a priority, which the market interpreted as a clear sign of a hawkish shift.

Before the press conference, the initial market reaction to the meeting was relatively subdued, with mild volatility in the euro, yen, and S&P 500. However, as the conference progressed and Walsh continued to stress price stability, market expectations were rapidly repriced, leading to sharp equity selloffs and U.S. dollar strength against the euro and yen.

Dot Plot Divergence Deepens, Walsh Abstains from Vote

This dot plot included 18 data points; 9 officials indicated at least one rate hike in 2026, showing clear internal differences. Notably, Walsh chose not to submit a forecast, a rare move historically that makes it even harder to determine his personal policy bias.

According to Goldman, because of high uncertainty regarding the new chairman’s debut, implied volatility before the FOMC meeting was already above historical averages. After the rate decision, realized volatility for major currency pairs was lower than implied; however, hawkish remarks during the press conference quickly pushed realized volatility above implied, a phenomenon observed for all major currency pairs except USD/JPY.

Announcement of Multiple Working Groups, Reform Signals Draw Attention

Beyond monetary policy, another key development from this meeting was the Fed’s announcement that several special working groups would be established in the coming months, covering topics like communication mechanisms, data, inflation, productivity, and artificial intelligence.

Goldman Sachs highlighted this arrangement as “especially noteworthy.” The creation of these working groups suggests Walsh intends a systematic review of the Fed’s operational framework and communication methods, a move whose impact could go well beyond a single rate decision and add new variables to how the market interprets the Fed’s forward guidance.

Overall, Goldman believes Walsh’s debut marks a substantive change in the Fed’s policy style—a shorter statement, a stronger focus on price stability, and a broader institutional review together constitute an “unsettled beginning.”

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