Fed Rate Cuts Delayed Until After 2026 as US Inflation Forecast Tops 4%
Economists have revised their outlook, pushing expectations for Fed rate cuts further out. The key driver is a higher US inflation forecast alongside stronger job growth. By late 2026, inflation is now expected to exceed 4%, reflecting persistent inflationary pressures and continued labor-market strength.
With the federal funds rate left steady after a major cut in late 2025, the report suggests the likelihood of Fed rate cuts before 2027 has fallen. Major banks including Goldman Sachs and Morgan Stanley have also adjusted forecasts, aligning with a scenario where there are no Fed rate cuts through 2026.
Market implications hinge on incoming macro data. Traders will likely focus on US inflation and employment releases from the Bureau of Labor Statistics, plus any Fed official commentary. If inflation trends down or job growth weakens, the path for Fed rate cuts could change. But if inflation stays elevated and labor remains firm, the Fed is more likely to keep policy restrictive for longer.
For crypto traders, the headline is a shift toward a more hawkish macro backdrop: delayed Fed rate cuts can lift real yields and tighten liquidity expectations, which historically pressures risk assets.
Bearish
The article points to a more hawkish Fed path: economists now expect US inflation to stay above 4% by late 2026, reducing the probability of Fed rate cuts before 2027. In crypto, delayed Fed rate cuts typically translate into higher real yields and tighter liquidity expectations, which can compress speculative demand and pressure broad risk sentiment.
In the short term, this can boost USD/US rates and increase volatility, making it harder for BTC and other liquid majors to rally sustainably. In the longer term, persistent inflation with strong job growth implies a higher-for-longer policy bias, which can keep discount rates elevated and weigh on the risk premium crypto trades on.
This setup is similar to past periods when upside inflation surprises pushed rate-cut timelines out: markets often repriced cash flows lower and rotated toward defensives, with crypto usually responding through drawdowns or slower recoveries until either inflation cools or the Fed signals a clearer easing trajectory.