Federal Reserve Expected to Hold Rates Until December, 25% Basis Point Cuts in 2026

Analysts from the Deutsche Bank Research Center have suggested that the Federal Reserve may maintain its current policy rate until December before implementing any rate cuts. According to their report, the next rate cut is anticipated to occur in December, followed by two additional cuts of 25 basis points each in the first quarter of 2026. This forecast is based on the easing of tensions between China and the U.S., which has reduced the risk of further deterioration in the U.S. labor market. However, other tariff measures could still keep inflation at uncomfortably high levels.
The analysts' baseline assumption is that the Federal Reserve will not cut interest rates until December. This decision is influenced by the current economic conditions and the potential impact of tariff measures on inflation. The easing of tensions between China and the U.S. has provided some relief, but the risk of high inflation remains a concern. The analysts predict that the Federal Reserve will cut rates by 25 basis points in December and continue with two more cuts in the first quarter of 2026. This gradual approach aims to balance the need for economic stability with the risk of high inflation.
The decision to keep interest rates unchanged until December is a strategic move by the Federal Reserve to monitor the economic landscape closely. The easing of tensions between China and the U.S. has reduced the risk of further deterioration in the U.S. labor market, but other tariff measures could still keep inflation at uncomfortably high levels. The Federal Reserve's cautious approach reflects its commitment to maintaining economic stability while addressing the challenges posed by inflation. The analysts' forecast of two additional rate cuts in the first quarter of 2026 indicates a gradual easing of monetary policy, aimed at supporting economic growth without exacerbating inflationary pressures.

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