How many Fed rate cuts in 2026?
The market is leaning strongly toward no Fed rate cuts in 2026, but the outcome is not locked in. My assessment is that zero cuts is more likely than not, though the odds are somewhat lower than the market-implied price because several major forecasters still expect at least one cut later in the year.
Analysis
The central question is whether the Fed will end 2026 with zero 25-basis-point cuts. The current market price for Yes is very high, and multiple market-linked and institutional sources point to zero cuts as the dominant near-term view. Reuters’ economist poll found 78 of 104 forecasters expected no change through year-end, and the June 2026 dot plot shifted upward enough that the median projection now implies a more hawkish stance than earlier in the year. That combination makes a no-cut outcome the single most plausible result, even if it is not certain.
The main reason to still leave meaningful room for at least one cut is that the Fed is not unanimous in its outlook and the broader forecasting community remains divided. Some banks and analysts still project cuts in the second half of the year, and several market commentaries continue to price easing later in 2026. That matters because this market resolves on the exact number of 25-basis-point cuts, so even a late-year 25 bp move would immediately falsify the zero-cuts thesis. In other words, the distribution is not just between hold and cut, but between hold, one late cut, and the possibility that the Fed instead stays flat or even tightens.
The case against cuts is strengthened by the macro backdrop described in the sources: sticky inflation, a resilient labor market, and ongoing energy or geopolitical risks all argue for caution. J.P. Morgan explicitly says it continues to look for no cuts this year and even sees the next move as a hike later on, while CNBC’s June reporting says the updated median year-end funds projection rose to around 3.8%, which is inconsistent with an expectation of easing. If inflation remains persistent through the second half of 2026, the Fed has little incentive to use its remaining policy flexibility on a cut.
At the same time, the market is not pricing an absolute lock. Goldman, Morningstar, Bankrate, Morgan Stanley, and other forecasters in the results still leave open at least one cut, with some expecting multiple cuts across 2026. That means the market’s strong Yes price is somewhat vulnerable if incoming data weakens enough to shift the Fed back toward support for growth. My read is that the balance of evidence still favors no cuts, but the presence of credible cut scenarios keeps the probability well below the market-implied level rather than near certainty.
Arguments
For
- Arguments for Yes: The Fed’s latest projections and the Reuters poll both lean toward holding rates steady through year-end.
- Arguments for Yes: Persistent inflation and a resilient economy give policymakers room to avoid cuts all year.
Against
- Arguments against Yes: Several major forecasters still expect at least one cut in the second half of 2026.
- Arguments against Yes: A late-year shift in data or sentiment could easily produce a single 25 bp reduction.
Key drivers
- The June 2026 dot plot and updated Fed projections appear more hawkish than earlier forecasts.
- Reuters’ economist survey shows a broad majority expecting no change through year-end.
- Sticky inflation and a solid labor market reduce the urgency for the Fed to ease.
- A late-year slowdown in growth or jobs could still force at least one cut.
Risk factors
- A single 25 bp cut late in 2026 would make the Yes outcome fail immediately.
- If disinflation resumes faster than expected, the Fed could pivot back toward easing.
- Prediction-market pricing may be overstating the certainty of a zero-cut year.
- Unexpected financial stress or labor-market weakness could trigger an end-of-year cut.
Scenarios
Best case
Inflation stays sticky, labor market data remain firm, and the Fed keeps rates unchanged at every remaining meeting, producing a clean zero-cuts outcome.
Most likely
The Fed stays on hold through most or all of 2026, with zero cuts remaining the most likely outcome, though the risk of one late cut stays material.
Worst case
Economic growth softens or inflation cools faster than expected, leading the Fed to deliver one or more cuts in the second half of the year.
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