Why JPMorgan no longer anticipates any rate reductions in 2026 — and expects an increase in the year after

JPMorgan: No Rate Cuts Expected in 2026 Amid Robust US Economy

• JPMorgan forecasts that interest rates will remain unchanged in 2026, citing continued strength in the US economy.
• The bank points to ongoing job creation, solid GDP expansion, and core inflation staying above 3% as factors that will likely prevent rate reductions.
• Despite this outlook, market participants are still anticipating two rate cuts in 2026.

While many investors are counting on the Federal Reserve to lower rates twice by 25 basis points each in 2026, JPMorgan now believes there will be no cuts at all.

In a client update dated January 9, the bank projected that the US economy will experience faster employment and GDP growth in 2026, with core consumer price inflation remaining above 3%. These conditions, according to JPMorgan, make it unlikely that the Fed will have grounds to ease monetary policy further.

Michael Feroli, JPMorgan’s chief US economist, wrote, “Given this expected economic backdrop, we don’t see the new dovish Fed chair convincing the FOMC to lower rates.”

Feroli added, “We now anticipate the Fed will keep rates steady throughout 2026, with the next possible increase coming in the third quarter of 2027.”

Market data from the CME FedWatch tool shows a 32% probability of two rate cuts in 2026, a 25% chance of a single cut, and a 22% likelihood of three reductions. There is also an 8% chance that rates will remain unchanged for the rest of the year.

Fed Leadership and Political Pressure

Former President Donald Trump is expected to name a new Federal Reserve Chair soon, with the new term starting in May. Trump has consistently urged the Fed to lower rates more aggressively, arguing that the benchmark rate should be closer to 1%. Currently, the Fed’s target range stands at 3.5% to 3.75%.

Tensions between the White House and the central bank intensified over the weekend. In a video released on Sunday, Fed Chair Jerome Powell disclosed that the Department of Justice had issued a subpoena related to his testimony last year about the Fed’s building renovations. Trump had previously cited the renovation costs as a reason to attempt to remove Powell from his position.

Powell stated, “No one — not even the Federal Reserve Chair — is above the law. However, this extraordinary measure should be viewed in the wider context of ongoing threats and pressure from the administration.”

This development triggered a widespread sell-off on Monday, affecting stocks, bonds, and the US dollar, as investors grew concerned about the Fed’s independence.