I=8
Fed predicts one rate cut in 2026, lower than three expected by the market
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Fed lowers interest rates by 25 basis points to a range of 4.0% to 4.25% as was widely expected by the market.
“Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated,” the post-meeting statement reads -
Fed’s “dot plot” of individual expectations indicated two more cuts this year and only one cut in 2026, significantly below market expectations for three cuts next year.
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Newly appointed fed governor Stephen Miran voted for 0.5% cut while the rest of the members voted for 0.25% move.
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S&P 500 futures fell 0.2% while Nasdaq Composite shed 0.6% following the report.
Assessment
Beyond the data, I expect political pressure and Powell’s term ending in May 2026 to result in more than one cut in 2026.