Fed adopts cautious outlook, expects only one rate cut in 2026

The US Federal Reserve signaled a more conservative stance than market expectations, projecting just one interest rate cut in 2026.

According to the Federal Open Market Committee’s (FOMC) quarterly projections, the median estimate for the federal funds rate stands at 3.4% by the end of 2026, down from 3.6% expected by the end of this year.

This comes after Fed officials forecast two additional rate cuts in 2025 totaling 50 basis points, following a 25-basis-point cut implemented during the policy meeting that concluded on Sept. 17, bringing the rate range to between 4% and 4.25%.

CME FedWatch Tool shows that markets currently expect between two and three rate cuts in 2026.

The FOMC report also highlighted a wide divergence in views among members: two participants projected four rate cuts in 2026, while three others forecast three cuts.