MarketMoodz
Fed Likely to Hold Rates as Markets Price 1–2 Cuts in 2026
The Federal Reserve is widely expected to hold its benchmark rate at the January FOMC meeting. Markets price 1–2 rate cuts later in 2026 as disinflation progresses, shifting focus from the near term to the policy path.
Key Takeaways
- Markets price 1–2 rate cuts in 2026, with June and December 2026 as the most likely months.
- The Fed is expected to hold today as last year's cuts work through the economy.
- CPI and PCE inflation indicators will shape the disinflation path and the pace of future easing.
- Post-meeting statement and Powell's press conference will signal the future policy path and risks to employment.
People Involved
- Jerome PowellFed Chair
- Stephen MiranFed Governor
- Roger FergusonFormer Fed Vice Chair
- Michael GapenMorgan Stanley Chief Economist
- Gregory DacoEY-Parthenon Chief Economist
- Stephanie RothWolfe Research Chief Economist
Entities Involved
- Federal Reserve (Fed)Central bank of the United States
- CME GroupMarket data provider for FedWatch
- Morgan StanleyInvestment bank
- EY-ParthenonConsulting arm of EY
- Wolfe ResearchResearch firm
- CNBCMedia outlet reporting on Fed preview
MarketMoodz Analysis
Stock and bond markets are likely to trade in a narrow range as the Fed holds today, with near-term funding costs staying steady while traders price in 1–2 rate cuts for 2026. The outcome will hinge on the post-meeting statement and Powell’s briefing, particularly whether the dot plot signals a quicker embrace of easing or a more cautious, growth-tilted stance.
The 2023–2024 rate-cut cycle aimed at disinflation and cooling the labor market has set the stage for a slower, more data-dependent easing path. If CPI and PCE trends continue to decelerate, the Fed can lean into a more confident glide path, supporting duration bets and equity risk assets aligned with a growing but less inflationary economy.
Watch for updates to growth and employment language in the post-meeting statement, potential shifts in the dot plot, and how mortgage and corporate borrowing costs react to any updated guidance. CPI and PCE releases ahead of the next meetings will be critical inputs for the credibility of disinflation and the timing of further easing.
Source: Original Article
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