Major Wall Street brokerages are coalescing around a view that the U.S. Federal Reserve will begin trimming interest rates in mid-2026, with most firms penciling in a first cut in June. Exceptions remain: J.P. Morgan forecasts the next Fed move will be a rate increase in 2027, and several global banks expect no cuts next year.
The shift in expectations follows an unexpectedly strong U.S. jobs report for January. Job growth accelerated more than forecast, and the unemployment rate declined to 4.3% - a sign of ongoing labor-market stability. That strength gives the Fed scope to keep its policy rate unchanged for longer while it continues to monitor inflation trends.
After the January employment data, Citigroup revised the timing of its anticipated first rate reduction for this cycle, moving the expected month from March to April. A Reuters poll indicated the Fed is likely to maintain current policy settings through Chair Jerome Powell's term, which ends in May, with the possibility of a cut coming immediately after in June. The same poll noted that some economists worry that policy under the Fed's likely successor, Kevin Warsh, could tilt too loose.
Market pricing reflected the near-term reluctance to ease policy: traders placed better than a 94% probability on the Fed leaving rates unchanged at its March meeting, according to the CME FedWatch tool.
Below are the brokerage forecasts for 2026 as reported:
| Brokerage | Total cuts in 2026 | No. of cuts in 2026 | Fed funds rate |
|---|---|---|---|
| Citigroup | 75 bps | 3 (in April, July and September) | 2.75-3.00% |
| Goldman Sachs | 50 bps | 2 (in June and September) | 3.00-3.25% |
| Morgan Stanley | 50 bps | 2 (in June and September) | 3.00-3.25% |
| BofA Global Research | 50 bps | 2 (in June and July) | 3.00-3.25% |
| Wells Fargo | 50 bps | 2 (in March and June) | 3.00-3.25% |
| Nomura | 50 bps | 2 (in June and September) | 3.00-3.25% |
| Barclays | 50 bps | 2 (in June and December) | 3.00-3.25% |
| UBS Global Research | 50 bps | 2 (July and October) | 3.00-3.25% |
| UBS Global Wealth Management | 50 bps | 2 (June and September) | 3.00-3.25% |
| Deutsche Bank | 25 bps | 1 (in September) | 3.25-3.50% |
| BNP Paribas | No rate cuts | - | 3.50-3.75% |
| HSBC | No rate cuts | - | 3.50-3.75% |
| J.P. Morgan | No rate cuts | - | 3.50-3.75% |
| Standard Chartered | No rate cuts | - | 3.50-3.75% |
| Macquarie | Rate hike Q4 | - | - |
The range of views spans expectations for several rounds of easing beginning mid-year to forecasts of no easing at all, and in one case an eventual tightening in 2027. The divergence underscores the continued sensitivity of rate forecasts to incoming economic data and to assumptions about Fed leadership after May.