"There is a 90% certainty that U.S. Federal Reserve Chairman 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.Today's cut is priced in at level of certainty approaching 90%. But here are what the levels of certainty for keeping the rate at 3.5% look like for 2026, per FedWatch: Only in June does a plurality-41.9%-emerge for a further cut to 3.25%."
""We see the Fed cutting rates twice in 2026, with moves in March and in June," ING's James Knightley et alargued earlier this month. Plus, "the potential for a more dovish FOMC 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 25bp cut in each of 2026 and 2027." Pantheon Macroeconomics' guess is for three cuts, "We expect 75bp of easing in 2026, but fiscal policy and FOMC personnel changes cloud the outlook.""
The CME FedWatch index assigns roughly 90% probability to a 25-basis-point Fed rate cut to 3.5% today but shows little certainty for additional cuts in 2026. Only June shows a plurality (41.9%) for a move to 3.25%. Analysts offer divergent forecasts: some expect two cuts in 2026, others foresee one cut in 2026 and 2027, and some predict three cuts totaling 75bps. The uncertainty reflects an upcoming change in Fed leadership in May, with multiple candidates—some considered dovish—potentially shifting the Federal Open Market Committee's stance and complicating the outlook.
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