How many Fed rate cuts in 2026?

The market is already assigning a very high probability that the Fed will keep rates unchanged through the end of 2026, and that baseline makes sense given the structure of the bet. There are only a few remaining FOMC meetings after mid-August, so the Fed would need a clear reason to shift course quickly. If inflation is still close enough to uncomfortable levels, or if officials believe financial conditions are not restrictive enough, the simplest path is to hold steady and avoid reopening the easing cycle. That policy inertia matters a lot in a market that only needs one 25 bp reduction to fail.

The strongest case for no cuts is that the Fed usually prefers to wait for multiple confirming data points before changing rates, especially if inflation has not fully settled. A single soft employment report or a temporary dip in growth is often not enough to justify action, and the committee may be reluctant to cut if it thinks inflation could re-accelerate. In that setting, the default choice is to preserve optionality and keep the policy rate where it is, particularly if officials can still argue that real rates remain positive and restrictive.

The main reason to be cautious on a full-year no-cut outcome is that the remaining window is long enough for the economic picture to deteriorate materially. If unemployment rises, consumer spending weakens, or financial stress builds, the Fed could decide that a modest 25 bp cut is warranted even without a recession. Emergency cuts are possible too, though they are less likely than a standard meeting move. Because the market only needs one cut to resolve to No, the downside risk is concentrated in a late-year pivot rather than in a broad range of scenarios.

Compared with the current market price, I am slightly less confident in Yes because the path from August to year-end still contains several data releases and several opportunities for a surprise. That said, the bar for a rate cut is usually higher than the bar for simply holding steady, and the absence of an obvious catalyst makes a no-cut year more likely than not. My best estimate is that the Fed stays on hold, but the probability is not high enough to treat this as near-certainty.