National Bank Of Canada (NBC) analysts Taylor Schleich, Ethan Currie and Warren Lovely, expect the Federal Reserve to resume rate cuts in March and June 2026, driven by labour market concerns despite firmer growth and inflation. They see only a brief easing window before stronger GDP, renewed hiring and higher inflation reassert themselves, leaving long-term Treasury yields largely range-bound through 2026.

Fed cuts, labour risks and Warsh

"But while OIS markets have materially re-priced near-term rate cut odds and the FOMC struck a patient stance in January, we still think the Fed could be easing soon."

"As such, we’ve officially retained our call for cuts resuming in March, but we acknowledge that could be delayed into the second quarter if the non-farm payroll data doesn’t weaken immediately."

"We’ve thus retained our call for cuts in March and June but concede there’s a risk the former could be delayed if job market weakness isn’t realized quickly."

"We also continue to believe that the central bank’s easing window will be a narrow one."

"Even if investors needn’t worry about a tightening of the Fed’s balance sheet, we remain skeptical that longer-term bond yields will moderate much."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)