JPMorgan forecasts the Fed to hold interest rates steady at 3.5-3.75% until 2026, diverging from market expectations of rate cuts.
JPMorgan, the largest bank globally, forecasts that the Federal Reserve will keep its key interest rate steady at 3.5-3.75% until 2026. This outlook contrasts with market expectations, which suggest potential rate cuts in the near future.
The bank's analysts indicate that while a 25 basis point reduction might be considered in the latter half of next year, they anticipate no immediate shifts in policy. Other major financial institutions, including Goldman Sachs and Barclays, have also revised their timelines for expected rate cuts to later in 2026, with Morgan Stanley predicting no action before June.
This shift in outlook comes amid tensions between U.S. President Donald Trump and Fed Chair Jerome Powell, who has faced pressure regarding interest rates. Powell previously claimed that the White House threatened him with legal action for resisting calls to lower rates.
JPMorgan's projections differ notably from those reflected in CME FedWatch, where traders are betting on multiple rounds of monetary easing. Many cryptocurrency analysts are optimistic that lower interest rates would boost risk appetite and positively affect risk assets, including cryptocurrencies.
Nonetheless, JPMorgan's analysts caution that a rate cut would only be considered if the labor market shows signs of weakness or if inflation decreases significantly. They expect the labor market to tighten by the second quarter, with inflation's decline being gradual.
Market Outlook for 2026
VanEck anticipates that the first quarter of 2026 will bring greater risk appetite as clarity in fiscal and monetary policies emerges. Analysts emphasize that the current market environment is more predictable, a condition not seen in recent years.
Despite ongoing high budget deficits, there is a trend of decreasing deficits as a percentage of GDP compared to the pandemic peak. This stabilization in fiscal policy is believed to help maintain long-term interest rates and mitigate extreme market fluctuations.
Such a favorable environment is seen as beneficial for digital assets and technology stocks. However, Bitcoin's recent price movements indicate a decoupling from traditional stock and gold markets following an October crash. Analysts are cautious about predicting short-term prices for Bitcoin due to disruptions in established market cycles, although some project it could reach $100,000 in January, suggesting a recovery phase for the cryptocurrency after recent outflows have stabilized.
