How many Fed rate cuts in 2026?
I think there is a high probability that the Fed makes no rate cuts in 2026, but the risk of at least one late-year cut is still meaningful. My estimate is slightly below the current market price because three remaining meetings leave room for a surprise if growth or labor data deteriorate.
Analysis
As of August 22, 2026, the key fact is that no rate cuts have occurred yet, and only a limited number of FOMC meetings remain this year. That makes the no-cut outcome quite plausible because the Fed usually needs a clear and sustained shift in the data before moving, especially if it has already spent time on hold. With only a few scheduled opportunities left, the path to a cut now depends on a relatively quick deterioration in inflation, employment, or financial conditions.
The strongest case for no cuts is that the Fed still has little reason to ease preemptively if inflation remains sticky or only gradually improves. A central bank that has spent the prior period fighting inflation is typically cautious about cutting too early, because an unnecessary pivot can undo progress and revive price pressure. If growth is merely slowing rather than contracting, the Committee can justify waiting longer, particularly if headline labor-market numbers still look acceptable.
The main reason to discount the no-cut side is that the remaining months of 2026 are enough time for the macro picture to change quickly. A sudden weakening in payrolls, a jump in unemployment, a credit or market stress episode, or a sharp drop in activity could convince policymakers to act at one of the remaining meetings or in an emergency setting. The current market price already reflects a very high confidence in no cuts, so the question is not whether the Fed is likely to hold today, but whether incoming data over the next several months create enough pressure to force at least one cut before year-end.
Arguments
For
- Arguments for Yes: The Fed usually waits for clear evidence before cutting, and a few months of mixed data are often not enough to change policy.
- Arguments for Yes: If inflation remains above target or only slowly declines, the Fed can justify holding rates steady through year-end.
Against
- Arguments against Yes: Three remaining meetings leave enough time for a modest slowdown to become a cut-worthy weakening in the labor market.
- Arguments against Yes: Even if the base case is no cuts, a single adverse surprise in growth or financial conditions would be enough to invalidate the outcome.
Key drivers
- Only a few FOMC meetings remain in 2026, which limits the number of chances for the Fed to deliver a cut.
- If inflation is still sticky, the Fed has a strong incentive to keep policy restrictive rather than ease prematurely.
- A meaningful labor-market slowdown would quickly raise the odds of one late-year cut.
- Emergency cuts are possible but historically rare, so they do not add much to the baseline probability.
Risk factors
- A sudden deterioration in employment data could push the Fed to cut sooner than the market expects.
- Financial-market stress or a credit event could trigger a policy response outside the normal glide path.
Scenarios
Best case
Inflation stays persistent, labor data remain resilient enough, and the Fed keeps rates unchanged at every remaining meeting, making no cuts the clear outcome.
Most likely
The Fed stays on hold through most or all of the remaining meetings because the data do not deteriorate enough to overcome its caution about easing too early.
Worst case
A sharp downturn in jobs or activity forces the Fed to cut once or more before year-end, immediately making the no-cut outcome impossible.
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