Moving From Cuts To Caution: Fed Enters 2026 In Wait-And-See Mode
Summarize this article with:
PIMCO2.62K FollowersFollow5ShareSavePlay(8min)CommentsSummaryThe Federal Reserve delivered a widely expected 25 basis point (bp) rate cut in December, then signaled a more data-dependent path ahead.We expect the Fed to hold rates steady in a range of 3.5%–3.75% for the remainder of Powell’s term as chair, which runs through May, before resuming gradual rate cuts later in the year under new Fed leadership.The December statement and projections reflect a Fed that now views monetary policy as within the range of neutral estimates – i.e., a rate the Fed expects will help promote trend-like growth. Richard Drury/DigitalVision via Getty Images By Tiffany Wilding and Allison Boxer With the policy rate in neutral territory, the Fed embraces data dependence, and faces a delicate balancing act in 2026.
The Federal Reserve delivered a widely expected 25This article was written byPIMCO2.62K FollowersFollowPIMCO is a global leader in active fixed income. With our launch in 1971 in Newport Beach, California, PIMCO introduced investors to a total return approach to fixed income investing. In the 50 years since, we have worked relentlessly to help millions of investors pursue their objectives – regardless of shifting market conditions. As active investors, our goal is not just to find opportunities, but to create them. To this end, we remain firmly committed to the pursuit of our mission: delivering superior investment returns, solutions and service to our clients. Visit PIMCO’s blog.
Subscribe To Get PIMCO Insights Delivered Directly to Your Inbox.Quick InsightsHow does the Fed's current stance affect expectations for further rate cuts?With policy rates in neutral territory and increased committee caution, the Fed is likely to hold steady, with no additional cuts expected until late 2026 barring economic shocks.What are the key risks and drivers for the Fed’s 2026 outlook?Resilient U.S. growth and fiscal stimulus could delay inflation’s return to target, but persistent labor market softness may prompt further cuts if growth falters.How significant are the Fed's technical balance sheet adjustments for markets?The earlier and larger-than-expected Treasury bill purchases are intended to provide liquidity and stabilize money market rates, but are not a signal of renewed quantitative easing.Recommended For You