Forbes 2026 Interest Rate Forecast, who decides the direction of the Fed?

Original Title: What To Expect For Interest Rates In 2026 Original Author: Simon Moore, Forbes Translated by: Peggy, BlockBeats

Original Author: Rhythm BlockBeats

Source text:

Reprinted: Mars Finance

Editor’s note: As the market bets on a “new Federal Reserve chairman + a new round of interest rate cuts” in 2026, the path of U.S. interest rates has once again become the main variable in the pricing of global assets.

CME futures indicate that the federal funds rate may drop to around 3% by 2026, down from the current range of 3.75%–4%, with the major cuts likely concentrated in the first half of the year. However, with inflation not yet fully back to target and signs of weakness in employment, the policy outlook remains highly uncertain. Although the Trump administration is expected to appoint a new chair who leans more towards easing, the operational mechanism of the FOMC dictates that the policy tone will still be dominated by economic data.

This article outlines the key interest rate schedule for 2026, the expected range for interest rate cuts, and the policy game, providing readers with a clear framework for understanding the direction of U.S. interest rates.

The following is the original text:

According to the CME FedWatch tool's pricing of interest rate futures, the market generally expects a short-term interest rate decline cycle in 2026 under the context of a “new Federal Reserve Chair.” The Federal Open Market Committee (FOMC) is likely to focus on the interest rate cut path during its eight scheduled meetings throughout the year.

Before this, the FOMC will still hold its last interest rate meeting of the year on December 10, 2025. The market believes there is a small possibility of a rate cut at this meeting, but the probability of maintaining the current interest rate should not be overlooked.

Interest Rate Path in 2026

According to current pricing, the federal funds rate is expected to drop to around 3% by December 2026, down from the current range of 3.75%–4%.

However, the outlook for interest rates still carries significant uncertainty: in more extreme market estimates, rates could drop as low as 2% or continue to stay at the 4% level.

If the FOMC ultimately initiates interest rate cuts, the market believes that the main rate cuts may be concentrated in the first half of 2026. In contrast, the Federal Reserve officials themselves have a more cautious outlook on the interest rate levels in 2026, with most predictions still indicating that rates will remain above 3%. However, these predictions were released in September and will be updated again in December.

2026 FOMC Meeting Schedule

Although the Federal Reserve can adjust interest rates at any time in economic emergencies, normal years typically follow the established schedule of eight regular meetings.

The interest rate meetings in 2026 will be held on the following dates: January 28, March 18, April 28, June 17, July 29, September 16, October 28, and December 9.

Starting in March, the FOMC will update the Summary of Economic Projections (SEP) at the alternating meetings.

The new chairman may promote lower interest rates.

President Trump is expected to nominate a new Federal Reserve Chairman who is more supportive of a “rate-cutting orientation” in 2026. Prediction markets (such as Kalshi) currently view Kevin Hassett as the most likely candidate.

This means that the interest rate policy in 2026 may be further influenced. For example, Stephen Miran, appointed by Trump in 2025, has often leaned towards a more aggressive rate cut position in votes.

However, aside from the selection of the chairperson, the overall voting structure of the FOMC will maintain the existing pattern, which means that monetary policy will not undergo a dramatic shift due to the new chairperson.

Economic data remains a core variable.

Ultimately, the Federal Reserve's decisions will still be dominated by economic data.

Currently: inflation is slightly above the 2% target, but there are no signs of it getting out of control; the unemployment rate has risen, but it has not reached alarming levels.

In such an environment, the FOMC is likely to lower interest rates at a moderate pace. If the unemployment rate deteriorates significantly, the rate cuts may be forced to be larger; conversely, if inflation unexpectedly rebounds, the Federal Reserve may slow down the pace of adjustments. However, the probability of the latter occurring at the moment is relatively low.

The most watched indicator currently is employment data. Some officials believe that the labor market is slowing down, which may weigh on the overall economy, and that interest rates should be lowered in advance; other officials believe that the softening of employment does not pose a real risk.

Employment data will continue to reveal which side's judgment is closer to reality in 2026.