Are Federal Reserve Cuts on the Horizon in 2026?
By Brian Famigletti, Managing Director & Head of Marketing
Standing Pat
Federal Reserve cuts in 2026 are a distinct possibility, but not a certainty.
The central bank started the year by standing pat. At its first meeting of 2026, the Federal Open Market Committee left its benchmark borrowing rate unchanged at 3.50%-3.75%. But there was little consensus among central bankers.
The Fed minutes showed two members dissented in favor of a modest rate cut, while others leaned more hawkish. Central bankers saw economic activity as “solid”, up from “moderate” in the previous minutes. The latest statement also removed references to rising “downside risks” to employment.
However, policymakers signaled that action is unlikely until there is clearer evidence that tariff-related inflation pressures have subsided. That could change with further data, or if President Trump’s presumed Fed Chair nominee Kevin Warsh takes the central bank’s helm in May, when current Chair Jerome Powell’s term ends. But for the time being, the Fed appears comfortable maintaining a near-neutral stance.
Timing is Everything
Federal Reserve cuts in 2026 depend largely on the trajectory of inflation.
J.P. Morgan forecasts inflation to peak mid-year before moderating. It also projects that fiscal stimulus and easing financial conditions could boost hiring temporarily, although structural labor constraints may limit increases in unemployment.
This environment may warrant patience for market observers. If inflation remains elevated or growth accelerates, cuts could be delayed. If inflation falls below target and growth slows materially, the path toward easing may reopen.
Markets currently price in just one 25-basis-point rate cut this year, with a strong probability of a second, per CME Group’s FedWatch.
Implications for Investors
The U.S. Supreme Court’s latest ruling could change the calculus.
In February 2026, the nation’s highest court struck down all tariffs issued under the International Emergency Economic Powers Act (IEEPA), which included many of the White House’s harshest trade policies.
President Trump was quick to respond, announcing a new 10% global tariff supported by a different statute, Section 122 of the Trade Act. But if tariffs fall in the short or long term, it could ease inflationary pressures, and potentially slow economic growth as well.
On the latter note, the International Monetary Fund recently updated its view on U.S. economic conditions. The IMF expects U.S. growth to rise to 2.4% this year, up from 2.2% last year, with the unemployment rate remaining near 4%, and inflation declining gradually rather than sharply.
These latest shifts serve as reminders that, as always, policy remains data-dependent. Investors should avoid building portfolios around a single rate scenario. Diversification remains important in equity investments, and duration exposure in fixed income should reflect both inflation risk and potential policy shifts.
If you would like to review how Federal Reserve cuts in 2026 may affect your portfolio positioning, contact Griffin Asset Management to speak with an expert.
Source:
JPMorgan: What is next for the Federal Reserve?
