Wall Street brokerages pencil Fed rate cuts in mid‑2026

• Most brokerages (Goldman Sachs, Morgan Stanley, BofA) predict 50 basis points in cuts during 2026, with rates ending at 3.00-3.25%, while Citigroup is most dovish with 75 bps in cuts
• Four major banks (J.P.Morgan, HSBC, BNP Paribas, Standard Chartered) forecast no rate cuts in 2026, keeping rates at 3.50-3.75%, and J.P.Morgan even anticipates a rate hike in 2027
• Traders are pricing in over 94% probability of no rate change at the March policy meeting, with concerns that policy could become too loose under Powell's likely successor Kevin Warsh

Summary: Wall Street Brokerages Pencil Fed Rate Cuts in Mid-2026

Key Developments:

Major Wall Street brokerages have revised their Federal Reserve interest rate projections following unexpectedly strong U.S. employment data. The unemployment rate fell to 4.3%, indicating labor market stability that gives the Fed room to maintain current rates longer while monitoring inflation.

Consensus View:

Most major banks, including Goldman Sachs, Morgan Stanley, Bank of America, and Wells Fargo, anticipate the Fed's next rate cut in June 2026, with total cuts of 50 basis points (two cuts) throughout the year. This would bring the Fed Funds Rate to 3.00-3.25% by year-end.

Notable Outliers:

• Citigroup expects three cuts (75 bps total) starting in April, ending at 2.75-3.00%
• Deutsche Bank forecasts only one cut (25 bps) in September
• J.P. Morgan, HSBC, BNP Paribas, and Standard Chartered expect no cuts in 2026, with rates remaining at 3.50-3.75%
• Macquarie stands alone in projecting a rate hike in Q4 2026
• J.P. Morgan uniquely forecasts the next move as a hike in 2027

Market Implications:

Traders are pricing in a 94%+ probability the Fed will hold rates steady at its March 2026 meeting. The central bank is expected to maintain rates through Fed Chair Jerome Powell's term ending in May 2026, with potential policy shifts under likely successor Kevin Warsh. Economists warn Warsh's leadership could result in overly accommodative monetary policy.

The divergent forecasts reflect uncertainty about inflation trajectory and the incoming Fed leadership's policy approach.