How many Fed rate cuts in 2026?

Market prices currently assign roughly an 80% probability to no cuts in 2026, reflecting strong conviction that the Fed will keep policy restrictive through the year; the high event volume indicates broad participation and that market-implied probabilities incorporate both Fed communications and macro data through the first half of the year. I weigh that signal heavily but adjust downward because markets often underprice low-probability macro shocks and the Fed has historically responded to sudden growth or financial stress with policy easing when downside risks crystallize.

On the fundamentals side, inflation has been trending toward target but remains vulnerable to upside surprises from services inflation and wage pressures, and the labor market has generally stayed robust; these conditions reduce the near-term impulse to cut and argue for steady policy through 2026 absent a clear inflection. The Fed’s reaction function emphasizes sustained progress toward its 2% inflation objective rather than one-off data moves, so a sequence of weak data would be required to change policy from hold-to-cut within a single year.

Timing and technical considerations favor no cuts: the Fed has multiple scheduled meetings in 2026 and typically signals policy shifts in advance, which reduces the odds of surprise cuts, and the market already prices a high probability of no cuts so any new information would need to be materially different to move the needle. However, emergency cuts outside scheduled meetings are possible and count toward this market; financial instability, a sharply tightening of financial conditions, or a sudden growth collapse would increase the chance of such a move and therefore represent the main pathway to the 'No' outcome.

Balancing these factors, I place the probability of no cuts at 72% — lower than the current market price because of tail risks and the historical tendency for central banks to ease when downside risks crystallize, but still significantly above 50% because inflation and labor conditions to date favor a hold-dominated 2026 policy path.