Recently, tensions between the U.S. and Iran have raised market concerns about a rebound in inflation, prompting major financial institutions to reassess the Federal Reserve's monetary policy path. JPMorgan has updated its interest rate forecast, believing that inflationary pressures in the U.S. will remain above the Fed's 2% target, leading to the cancellation of all rate cut expectations for 2026.
According to a research report released by its New York branch, JPMorgan had previously predicted that the Fed might cut rates once this year, but now clearly states that rates will stabilize in the range of 3.5% to 3.75% in 2026, with no plans for a reduction. Notably, the bank even predicts that if inflation does not effectively ease, the Fed may initiate a new round of rate hikes in 2027, raising rates to 4%.
This stance sharply contrasts with mainstream market expectations. Institutions like Citigroup and TD Cowen still anticipate three rate cuts throughout the year; Barclays, Goldman Sachs, Morgan Stanley, Nomura, and Wells Fargo generally predict two; while Deutsche Bank expects only one. JPMorgan's hawkish assessment reflects heightened concerns about the resilience of the U.S. labor market and the stickiness of core inflation.
Currently, the market is closely monitoring the interplay between inflation data and geopolitical risks. If energy prices continue to fluctuate due to geopolitical conflicts, the Fed may be more inclined to maintain high rates to ensure price stability rather than rush towards easing.