Why JPMorgan now sees zero rate cuts in 2026 — and a hike coming the following year

• JPMorgan predicts no rate cuts in 2026 amid strong US economic growth.
• The bank said job and GDP growth, plus core CPI above 3%, will challenge expectations for rate cuts.
• Markets are still expecting two rate cuts in 2026.

Investors have come to expect two 25-basis-point rate cuts from the Federal Reserve in 2026, but JPMorgan is now saying they won't get any.

In a January 9 note to clients, the bank said the US economy will see accelerating job and GDP growth in 2026, as well as core CPI above 3%, making it difficult for the central bank to make a case for further rate cuts.

"Against this anticipated macro backdrop, we do not see the new dovish Fed chair being able to sway the FOMC to cut," wrote Michael Feroli, the bank's chief US economist.

"We now expect the Fed to hold rates throughout 2026 with the next move to hike later in 2027," Feroli wrote. He said the 25 basis-point hike would come in Q3 next year.

According to the CME FedWatch tool, markets are pricing in a 32% chance of two cuts in 2026, a 25% chance of one cut, and 22% odds of three cuts. Investors see an 8% chance that the Fed will hold rates steady through the end of the year.

President Donald Trump is set to appoint a new Fed Chair in the months ahead, with their four-year term beginning in May. Trump has repeatedly pressured Fed officials to cut interest rates at a faster pace, arguing that the central bank's short-term lending rate should be around 1%. Right now, the Fed's benchmark rate is 3.5%-3.75%.

Over the weekend, the feud between the president and the central bank escalated sharply. In a video posted on Sunday, Fed Chair Jerome Powell revealed that the Fed had been subpoenaed by the US Department of Justice over his testimony last year about its building renovations. Trump previously tried to use the cost of the renovation as an excuse to fire Powell.

"No one — certainly not the chair of the Federal Reserve — is above the law," Powell said. "But this unprecedented action should be seen in the broader context of the administration's threats and ongoing pressure."

The news sparked a broad sell-off on Monday that hit stocks, bonds, and the dollar as traders fretted over the independence of the Fed.