If you were counting on the Federal Reserve to cut interest rates this year, JPMorgan’s chief economist has a message you may not want to hear.
Michael Feroli, chief U.S. economist at JPMorgan, has forecast zero rate cuts through all of 2026, with the Fed’s next move being a 25 basis point rate hike in the third quarter of 2027, according to Yahoo Finance. That would bring the upper band of the federal funds rate to 4.00%. The current rate sits at 3.50% to 3.75%.
The forecast puts JPMorgan squarely at odds with the Federal Reserve’s own projections and with most of Wall Street, and the gap is not getting any smaller as the Iran war keeps energy prices elevated and inflation stubborn.
Feroli made his case on CNBC in March, pointing to two forces keeping the Fed on the sidelines: a labor market that remains too resilient to justify easing, and inflation that continues to run above the Fed’s 2% target. Unemployment stands at 4.4% and core inflation has not fallen quickly enough to give the Fed the cover it needs to act.
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“We have an inflation problem,” Feroli said on CNBC, while adding that it was not “intractable.” Given what he described as a “pretty favorable economy,” he said inflation “should get better over time.”
The Iran war adds a new layer of complexity. “The conflict in the Middle East adds a whole new wrinkle,” Feroli said on CNBC. Oil prices have surged since the conflict began in late February, adding upward pressure on inflation just as the central bank was hoping to see it cool. The Fed itself acknowledged the uncertainty in its March statement, noting that “the implications of developments in the Middle East for the U.S. economy are uncertain,” according to CNBC.
Even the Fed chair is hedging. Jerome Powell said at his March press conference that the single rate cut the Fed penciled in for 2026 was not guaranteed. “If we don’t see that progress, then you won’t see the rate cut,” he said.
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Feroli was also careful to note his call was not set in stone. “If the labor market weakens again in the coming months, or if inflation falls materially, the Fed could still ease later this year,” he wrote, according to JPMorgan.
Markets are increasingly moving in Feroli’s direction. The CME Group FedWatch Tool, which tracks rate expectations using futures pricing, puts the likelihood of a December rate cut at just 27.5%. At one point in late March, futures traders briefly priced in a 52% probability of a rate hike by the end of 2026.
