The Federal Reserve’s latest economic projections reveal a surprisingly shallow path for interest rate cuts in 2026, signaling that the policy will remain restrictive as the central bank contends with a resilient economy and sticky inflation.
Fed Forecasts Less Than A Single Cut In 2026?
The committee’s median forecast for the federal funds rate shows a decline to only 3.4% by the end of 2026, a mere 0.2 percentage point drop from the 3.6% projected for year-end 2025.
While 20 bps is less than a standard cut of 25 bps, this indicates that the median FOMC participant does not foresee a clear case for even one full rate reduction over the course of 2026.
The slow pace led experts to temper expectations for significant easing, with Stephen Rybka, the chief technology officer at Yardeni Research, concluding that “most Fed officials don’t expect to make many more reductions next year”.
Fed Remains ‘In A Pickle’
The central bank’s cautious stance is underpinned by its own upgraded economic outlook for 2026. Projections released Wednesday show officials now see a stronger economy than they did in June, with the median forecast for …