Economist Expects No Fed Moves on Interest Rates in 2026

A top economist expects the Federal Reserve to keep interest rates unchanged throughout 2026, with its next move likely a raise in 2027.

Michael Feroli, J.P. Morgan’s chief U.S. economist, issued his revised outlook after a series of Fed cuts in late 2025 that helped bring mortgage rates to their lowest levels in more than a year, according to a note reported by Realtor.com. While financial markets continue to price in two additional cuts in 2026, Feroli argued economic conditions will not justify further easing.

He anticipates stronger job growth this year and expects core inflation above 3 percent, a level he believes is too high for the Fed to resume cutting.

Fed Chair Jerome Powell’s term expires in May, and President Donald Trump is expected to nominate a successor who favors lower rates.

But the chair holds only one vote on the 12‑member Federal Open Market Committee, and Feroli wrote in the note that he does not believe a more dovish leader could persuade the committee to ease policy in this economic environment.

Feroli stresses that his forecast is not guaranteed. If the labor market weakens or inflation falls more sharply than expected, the Fed could still cut later in 2026. However, he expects labor conditions to tighten by the second quarter and sees the disinflation process unfolding slowly.

A prolonged period of elevated inflation and steady Fed policy would keep upward pressure on mortgage rates, which heavily impact home sales. While rates recently averaged 6.16 percent — near 2025 lows — analysts at Realtor.com project an average of roughly 6.3 percent in 2026.

J.P. Morgan’s analysis comes on the heels of a jobs report showing unemployment dipping to 4.4 percent from a four‑year high of 4.5 percent.

Signs of stabilization have prompted other major banks to push back their expectations for Fed cuts. Goldman Sachs and Barclays now anticipate the first cut in June rather than March, though both still expect three quarter‑point reductions through 2026. The banks argue that if the labor market continues to steady, the Fed will shift from a risk‑management stance to a traditional normalization approach.

– Joel Russell