J.P. Morgan Predicts the Fed Will Make No Interest Rate Cuts in 2026—but Expects a ‘Hike’ Next Year

The top economist at J.P. Morgan believes the Federal Reserve is done cutting interest rates and will hold policy steady through 2026, with the next move likely a hike in 2027.

"We now expect the Fed to hold rates throughout 2026 with the next move to hike later in 2027," wrote Michael Feroli, the bank's chief U.S. economist, in a client note.

The forecast comes after a series of Fed rate cuts in the fall and winter of 2025, which helped to push mortgage rates down to their lowest level in more than a year.

While there are growing signs that Fed policymakers will hold rates steady at the next meeting later this month, financial markets are predicting two more rate cuts in 2026.

However, Feroli believes that the U.S. economy will experience accelerating job growth this year and that core inflation will remain above 3%, making it difficult for the Fed to cut rates.

Although Fed Chair Jerome Powell's term expires in May, and President Donald Trump is expected to nominate a replacement who favors lower rates, the chair is but one vote on the 12-member Federal Open Market Committee (FOMC), which sets rate policy.

"Against this anticipated macro backdrop, we do not see the new dovish Fed chair being able to sway the FOMC to cut," wrote Feroli.

Still, the economist noted that his forecast was not a certainty and that changing economic conditions could prompt the Fed to act.

“If the labour market weakens again in the coming months, or if inflation falls materially, the Fed could still ease later this year,” he wrote. “However, we expect the labour market to tighten by the second quarter, and the disinflation process to be quite gradual.”

For mortgage rates, prolonged inflation and tighter monetary policy from the Fed would deliver upward pressure, likely keeping rates above 6% for the next year.

Mortgage rates averaged 6.16% last week, according to Freddie Mac, remaining near the lowest levels of 2025. The Realtor.com® economic research team forecasts that mortgage rates will average around 6.3% across 2026.

J.P. Morgan's new forecast follows the latest jobs report, which shows that the unemployment rate fell last month to 4.4%, down from November’s revised 4.5%, which marked a four-year high. 

Signs of a stabilizing job market also prompted Goldman Sachs and Barclays to revise their forecasts for Fed rate cuts this year, which the two banks now see as coming later in the year.

Goldman and Barclays believe the first Fed cut won't come until June, after previously forecasting cuts in March. The two banks still see a total of three quarter-point rate cuts through 2026.

“If the labour market stabilizes as we expect, the Federal Open Market Committee will likely shift from risk-management mode to normalization mode,” Goldman said in a note.