Enjoy your Fed interest rate cut today—it may be the last one for a while. There is a 90% certainty that U.S. Federal Reserve Chair Jerome Powell will announce a 0.25% cut to the base rate this afternoon, bringing it down to the 3.5% level, according to speculators on the CME FedWatch Fed funds futures index. But after that, the FedWatch index is indicating no certainty for any further cuts in 2026.
Here are what the levels of certainty for keeping the rate at 3.5% look like for 2026, per FedWatch:
- January: 72.2%
- March: 55.8%
- April: 47.6%
Only in June does a plurality—41.9%—emerge for a further cut, to 3.25%.
Analysts are all over the place in their guesses about how many further rounds of cheaper money the Fed will deliver next year, and with good reason: President Trump is set to replace Powell with a new Fed chair in May.
“We see the Fed cutting rates twice in 2026, with moves in March and in June,” ING’s James Knightley et al. argued earlier this month. Plus, “the potential for a more dovish FOMC [Federal Open Market Committee] tilts the risks toward additional rate cuts later in the year.
“But does this matter, given that we know the Federal Reserve’s structure is changing?” Knightley wrote.
At Deutsche Bank, the forecast is “one further 25 bp cut in each of 2026 and 2027.”
Pantheon Macroeconomics’ guess is for three cuts: “We expect 75 bp of easing in 2026, but fiscal policy and FOMC personnel changes cloud the outlook.”
The presumed favorite candidate for Fed chair is Kevin Hassett, widely regarded as a “dove” who will follow Trump’s preference for lower rates regardless of rising inflation. But there are three others in the running: Fed governors Kevin Warsh, Christopher Waller, and Michelle Bowman, and BlackRock chief investment officer of global fixed income Rick Rieder.
It’s not certain if the new appointee will tip the FOMC into a more dovish position (favoring more cuts) or whether the Fed’s institutional commitment to apolitical economics will prevail, which would imply a slower schedule of cuts or perhaps—if inflation continues to rise—none at all.
ING’s Knightley noted that by the end of 2026 it is possible that “five of the seven members of the Board of Governors are Trump appointees.” The Fed is about to become much more unpredictable, in other words.
Stock markets are largely in a holding pattern today as investors wait for the rate decision. It will be Powell’s commentary—and whether he says or doesn’t say certain words—that move markets this afternoon. S&P 500 futures were flat this morning prior to the open after the index closed flat yesterday.
Here’s a snapshot of the markets ahead of the opening bell in New York this morning:
- S&P 500 futures were flat this morning. The last session closed down marginally 0.09%.
- The STOXX Europe 600 was down 0.12% in early trading.
- The U.K.’s FTSE 100 was up 0.29% in early trading.
- Japan’s Nikkei 225 was down 0.1%.
- China’s CSI 300 was down 0.14%.
- The South Korea KOSPI was down 0.21%.
- India’s Nifty 50 was down 0.32%.
- Bitcoin was at $92K.
