Rabobank’s Senior US Strategist Philip Marey expects the FOMC to deliver three 25 bps cuts in 2026, but now sees the easing cycle starting in June rather than March. Stronger US labor market data have reduced the urgency for near-term easing, while softer CPI inflation supports cuts later in 2026. The federal funds rate is projected to end slightly below neutral.

Rabobank shifts timing of 2026 easing

"To summarize, the case for additional rate cuts later in 2026 appears to be building through easing inflation, while the case for near-term rate cuts to prevent a deterioration in the labor market has weakened."

"We stick to our June and September rate cuts and we add one in October."

"Under normal circumstances, with the case for rate cuts increasing during the course of the year, and the neutral rate as the end point of the cutting cycle, we would put the second and third rate cut in September and December; both meetings include an update of the Summary of Economic Projections."

"However, we still expect three rate cuts of 25 bps each in 2026, because the new Fed Chair is likely to push for more than one cut."

"Since the data are not likely to trigger Powell into further cuts in his remaining months as Chair, Warsh will have to slash 75 bps from the current target range for the federal funds rate of 3.50-3.75%."

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