A Major Shift in Monetary Policy Looms by 2026
A senior Federal Reserve official recently indicated that rate cuts totaling around 150 basis points could be on the table by 2026, as inflation shows sustained progress toward the 2% target.
Markets reacted swiftly, with Treasury yields declining and equity indices gaining momentum. Analysts suggest that if economic indicators continue to soften, the Fed may begin easing earlier than expected to support growth.
The Economic Rationale Behind the Expected Cuts
- Current interest rates are seen as overly restrictive, potentially dampening business and consumer activity
- Job market trends show moderation, with wage growth stabilizing
- Core PCE data has remained below 2.5% for several consecutive quarters
Experts caution that while the outlook is shifting, the central bank will remain data-dependent. Key economic reports over the next 12 months will play a decisive role in shaping the pace and timing of any policy adjustments.