JPMorgan Removes 2026 Fed Rate Cut Outlook as Bitcoin Drops to $90,000

JPMorgan has removed its expectation for a 2026 Federal Reserve rate cut, shifting its outlook to a prolonged tightening cycle. The bank cited strong labor market data as the main reason for the change. This move adds to growing uncertainty among investors about the direction of monetary policy.

Bitcoin responded to the revised expectations by dropping to around $90,000. The cryptocurrency had previously shown strength, but the shift in rate-cut forecasts has led to a sharp pullback. Market participants are now evaluating how tighter monetary conditions will impact risk assets.

Goldman Sachs, Barclays, and Morgan Stanley have also adjusted their projections for 2026. These institutions have delayed expected rate cuts to mid-2026 or later. The broader financial market is adjusting to a more cautious policy outlook amid resilient economic data.

Why Did the Fed Rate Cut Outlook Change?

JPMorgan cited recent U.S. jobs data as the reason for its revised forecast. The labor market remains resilient, with the unemployment rate at 4.4% and wage growth stable. This combination suggests less urgency for rate cuts in the near term.

The shift also reflects broader macroeconomic trends. Stronger-than-expected employment numbers have reduced the pressure for immediate rate reductions. Analysts suggest that the Fed may maintain its current policy stance unless inflation drops significantly.

How Did the Market React?

Bitcoin's price has been directly affected by the updated outlook. The cryptocurrency has lost approximately $10,000 in value since the shift in expectations. Traders are now rethinking their positions in response to the prolonged tightening cycle.

Other assets also reacted. U.S. spot Bitcoin ETFs have seen increased outflows, signaling weaker institutional demand. The market is recalibrating to a more cautious monetary policy path, affecting both traditional and digital assets.

What Are Analysts Watching Next?

Investors are now closely monitoring upcoming inflation data. The December CPI report is expected to provide clarity on whether inflation is cooling or persisting. This data could determine whether the Fed remains on its current trajectory or pivots toward easing.

Political developments also remain a concern. A recent criminal investigation into Fed Chair Jerome Powell has raised questions about the independence of the central bank. This uncertainty could impact market confidence in the Fed's ability to make data-driven decisions.

The next key event is the Fed's January 28 policy meeting. Traders are pricing in a high probability of a rate hold. If the central bank maintains its stance, the market could see further pressure on Bitcoin and other risk assets.

Analysts suggest that stronger labor market weakness or a meaningful decline in inflation would be required for the Fed to consider rate cuts in 2026. Until then, the market is bracing for a continuation of tighter monetary policy.