While investors are pricing in two Fed rate cuts in 2026, JPMorgan strategists have come up with a surprising forecast: no monetary policy easing at all.
Moreover, the bank expects rates to rise next year, Business Insider reports.
In a note to clients, JPMorgan's chief US economist, Michael Feroli, explained that strong macroeconomic data will tie the regulator's hands. Specifically, GDP and employment growth are expected to accelerate, while core inflation will remain above 3%. Under such conditions, it will be extremely difficult for the Fed to justify the need for rate cuts.
JPMorgan believes that the rate will remain unchanged this year and will increase by 25 basis points in the third quarter of 2027. This contrasts sharply with market expectations. Currently, the probability of two rate cuts in 2026 is estimated at 32%, while the no-rate scenario is only 8%.
JPMorgan's forecast runs counter to the wishes of Donald Trump, who is pushing for a rate cut to 1% and is preparing to appoint a new Fed chair in May. However, Feroli believes that even the new chair's dovish stance won't convince the FOMC to cut rates in the face of such macroeconomic data.