JPMorgan Chase is bucking the trend, forecasting no interest rate cuts from the Federal Reserve throughout 2026. This stark prediction contrasts sharply with the Fed’s own projections and the broader consensus on Wall Street.
Michael Feroli, JPMorgan’s chief U.S. economist, anticipates the Fed’s next move will be a 25-basis-point rate hike in the third quarter of 2027, pushing the upper band of the federal funds rate to 4.00%. The current rate range is 3.50% to 3.75%.
Feroli argues that a resilient labour market and persistent inflation, exceeding the Fed’s 2% target, will keep the central bank on the sidelines. The unemployment rate currently stands at 4.4%, and core inflation has not decelerated sufficiently to warrant easing monetary policy.
Speaking on CNBC in March, Feroli acknowledged the inflation challenge but expressed confidence that it was not insurmountable. He believes that a "pretty favorable economy" should lead to improvements over time.
The ongoing conflict in Iran adds another layer of uncertainty. The surge in oil prices since the conflict’s onset in late February is exerting upward pressure on inflation, complicating the Fed’s efforts to cool down the economy. The Fed itself acknowledged the uncertainty in its March statement, noting that "the implications of developments in the Middle East for the U.S. economy are uncertain," according to CNBC.
Even Fed Chair Jerome Powell has adopted a cautious tone, stating that the single rate cut projected for 2026 is not guaranteed. "If we don’t see that progress, then you won’t see the rate cut," he said during his March press conference.
However, Feroli stressed that his forecast is not immutable. A weakening labour market or a significant decline in inflation could prompt the Fed to ease policy later this year.
Financial markets are increasingly aligning with JPMorgan’s perspective. The CME Group FedWatch Tool, which gauges rate expectations based on futures pricing, indicates only a 27.5% probability of a rate cut in December. Notably, futures traders briefly priced in a 52% chance of a rate hike by the end of 2026 at one point in late March.
