How many Fed rate cuts in 2026?

The market-implied probability for no Fed rate cuts in 2026 is very high at 88.5%, which suggests traders believe the Fed can plausibly hold policy steady throughout the year. That kind of pricing usually reflects an expectation that inflation is not yet low enough to justify easing, or that the Fed would prefer to keep real policy rates restrictive until there is clearer evidence of disinflation. Because this market resolves to No if any cut happens at all, even a single 25 basis point move later in the year would defeat the Yes outcome, so the bar for success is extremely strict.

From a macro standpoint, the strongest case for no cuts is that the Fed may view 2026 as a year of patience rather than relief. If growth remains solid, unemployment does not rise materially, and inflation hovers above target, officials could decide that premature easing would risk undoing progress on price stability. In that environment, the Fed would likely prefer to wait for more durable confirmation that inflation is anchored before beginning a cutting cycle, especially if financial conditions are already loose enough to make restraint less binding.

The main reason to assign some chance to cuts anyway is that Fed policy often changes faster than consensus expects once the data weaken. A modest deterioration in hiring, consumer demand, or credit conditions could quickly create pressure for a 25 basis point cut, and an emergency cut is also possible if markets or the economy deteriorate abruptly. Since the market remains open through year-end and includes any cuts at scheduled meetings or outside them, the path to No depends on the economy staying sufficiently stable for the rest of the year, which is possible but not guaranteed.

Given the very one-sided market price and the lack of any specific adverse catalyst in the provided context, the most defensible position is that no cuts are somewhat more likely than not, but not as likely as the market implies. The probability should reflect the Fed’s caution and the inertia of policy, while still leaving room for a late-year downside surprise that forces at least one reduction.