Will the Fed Keep Cutting Rates in 2026? Here's What Experts Predict
The Federal Reserve delivered Wall Street the holiday gift of a rate cut late last year, but policymakers seem to think that’s sufficient for the time being. Expert projections show that the most likely outcome is a total of two rate cuts in 2026, down from three last year.
The central bank implemented the last of three consecutive quarter-percentage-point cuts of 2025 at its December meeting, bringing its benchmark federal funds rate down to a range of 3.5% to 3.75%.
Current projections based on futures market activity show a roughly 56% probability of two or fewer rate movements this year. It’s unclear when the first expected cut of 2026 will be, although most economic experts are in broad agreement on a couple of aspects: The Fed likely won’t change rates at this month’s meeting. It's also unlikely to wait until autumn again.
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View Rates"It seems like the market is thinking the next cut would come around June. I personally don’t think we're going to see a lot of major movement between here and there," says Derik Farrar, head of everyday banking and borrowing at U.S. Bank.
There’s more ambiguity than usual when it comes to reading the Fed tea leaves, says Ross Mayfield, investment strategist at Baird.
“There's room on both sides of the base case — more than usual, I would say,” he adds.
One factor driving the hazy outlook, according to Mayfield and others, is that President Donald Trump will have a hand in reshaping the makeup of the rate-setting committee in 2026, including nominating a new chair to succeed Jerome Powell once his term ends in May. Trump has made no secret of his desire for lower rates, and Trump-aligned contenders for the top job have made public arguments for more and faster cuts.
The stakes are high to get it right: Leave rates too high for too long, and the economy could fall into a recession that crushes the labor market. Keep them low when the economy is overheating, and inflation could spark into an inferno — the mistake the Fed made a few years ago that pushed inflation to a four-decade high by 2022.
And market observers note that there’s more disagreement than usual among policymakers about how to strike that balance.
“In the past, the Fed chair has driven consensus,” Farrar says, but policymakers today are more willing to vote against decisions they disagree with rather than present a united front.
Even if a new Fed chair clashes publicly with fellow policymakers, the impact on rates will probably be minimal, says Scott Ladner, chief information officer at Horizon Investments.
The Fed chair is one of just 12 voting members of the rate-setting committee. That said, the chair position does come with extra clout, he adds.
“Much like the president has a bully pulpit, the Fed chair has that for monetary policy,” Ladner notes.
What 2026 Fed rate cuts would mean for your money
While the Fed doesn’t directly set interest rates Americans pay on products like mortgages and credit cards, its benchmark rate is an anchor lenders use when setting their rates, particularly for the variable rates that are characteristic of credit cards. Mortgage rates are also influenced by the Fed, although the impact is more complex and relies on other economic activities like bond-buying as well as rate-setting.
Unfortunately for savers, that means there’s little chance of a return to the 5%-and-up savings account and CD yields they were able to earn three or four years ago.
"Any short-term CDs or money market funds track the fed funds rate pretty closely. If the base case plays out… by the end of the year you'd see about 3% on most of those products," Mayfield says.
For borrowers, this means that the current rates they see are likely to stick around for some time. “What you’ve got today is what you're going to get for next year,” Ladner says.
Farrar says the prospect of static rates might be enough to pull people financing big-ticket purchases like homes and cars off the sidelines. This has the potential to be good news for homeowners trying to sell in a sluggish market, while the release of pent-up demand for other goods and services potentially could contribute to economic activity at the margins.
The good news for borrowers is that experts see little chance of the Fed reversing course and hiking rates, although people with credit card debt can expect APRs to remain elevated. Government data shows that the average rate for accounts with revolving balances is nearly 23%.
“It still doesn't change what you should do next," Farrar says. "Pay off your credit cards.”
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