JPMorgan’s recent shift in forecast is turning heads because it challenges what many investors had assumed about U.S. monetary policy for 2026. Instead of predicting one or more rate cuts next year, the Wall Street heavyweight now expects the Federal Reserve to hold interest rates steady throughout all of 2026 and see the next actual move be a rate increase in 2027.
The bank’s change of view reflects a broader reassessment of economic conditions. Earlier market expectations leaned toward monetary easing next year, based on hopes of slowing inflation and weakening labor market data. But recent indicators — particularly a resilient job market and core inflation that remains above the Fed’s comfort zone — suggest that the conditions supporting rate cuts may not materialize as anticipated.
Instead of preparing for relief through easier money in 2026, JPMorgan’s economists now see a scenario where the economy stays strong enough that the Fed simply keeps rates where they are. That means no reductions at all — a notable shift from the conventional wisdom just weeks ago.
This view is not just a speculative outlier. Other major financial institutions, such as Barclays, Goldman Sachs, and Morgan Stanley, have also pushed back their expected timelines for rate cuts, signaling a larger consensus that the U.S. central bank will remain cautious about lowering borrowing costs too soon.
The reasoning is rooted in the belief that inflationary pressures are persistent and the labor market is far from fragile. Wage growth has stayed solid, and unemployment rates have not spiked dramatically — both factors that reduce the urgency for the Fed to ease policy. When job growth and inflation metrics are stickier than expected, central bankers are more inclined to maintain a neutral stance rather than cut rates.
Looking even further ahead, JPMorgan anticipates that the first policy move after this extended pause could actually be a hike in the third quarter of 2027. That’s a dramatic turn from the narrative of cutting rates to cushion the economy. A future hike implies that the central bank could be reacting to stronger-than-expected growth or renewed inflationary pressures, rather than trying to stimulate a weakening economy.
For markets and investors, this updated forecast matters a great deal. Expectations about interest rates influence everything from equity valuations to bond yields and even crypto sentiment. When big banks like JPMorgan shift their outlook in a more hawkish direction, markets can reprice risk assets — sometimes abruptly.
In essence, JPMorgan’s latest forecast highlights a potential structural shift in how the Fed navigates the post-pandemic era of monetary policy. Rather than aggressively responding to slowdowns with cuts, the central bank could prioritize controlling inflation and sustaining economic strength even if that means delaying cuts indefinitely and, eventually, raising rates again.
This recalibration holds significant implications for investors across all asset classes, because it signals that the era of easy money may be longer paused than many anticipated and that tightening could return on the horizon if economic resilience persists.