Wall Street Brokerages Pencil In Fed Rate Cuts in Mid-2026 as U.S. Jobs Data Stays Strong

Major Wall Street banks and brokerages are increasingly lining up behind a similar message for 2026: the U.S. Federal Reserve may keep interest rates unchanged for a while, then begin cutting around the middle of the year—unless inflation or growth forces a different path. In a Reuters report dated January 14, 2026, analysts at big firms such as Goldman Sachs and Morgan Stanley pointed to June 2026 as a likely timing for the next Fed rate cut, while J.P. Morgan stood out with a more hawkish view, suggesting the next move could even be a rate hike in 2027.

Behind these forecasts is a familiar tug-of-war: the Fed wants inflation moving convincingly toward its target, but it also watches the labor market closely because strong hiring and steady wages can keep price pressures alive. The latest U.S. jobs report referenced by Reuters showed job growth unexpectedly accelerated in January and the unemployment rate fell to 4.3%—a combination that suggests the economy is still standing on solid ground.

What the Reuters Report Said—and Why Markets Paid Attention

According to Reuters, the shift in expectations is not just coming from one bank or one strategist. It’s showing up across multiple major institutions, which matters because these firms influence how investors think about bonds, stocks, mortgages, corporate borrowing, and even currency markets. The Reuters report highlighted that:

• Goldman Sachs and Morgan Stanley expect the next Fed rate cut in June 2026.
• J.P. Morgan is more cautious about cuts and sees the next move as a hike in 2027.
• Citigroup pushed back its expectation for the first cut of the year to April, after previously looking for March, following the strong jobs data.

In plain English: the stronger the economy looks—especially employment—the easier it is for the Fed to wait. When businesses keep hiring and unemployment stays low, people tend to keep spending. That can support growth, but it can also keep inflation from cooling fast enough. So, investors often respond to strong jobs data by pushing rate-cut expectations further out.

Why “Higher for Longer” Still Shows Up in 2026 Forecasts

The phrase “higher for longer” became popular because it captures a simple idea: if inflation is sticky, the Fed may keep rates high longer than markets originally hoped. The Reuters piece described the January labor market as stable enough to “give the central bank room” to keep rates unchanged while it watches inflation.

That “room” is important. If the Fed cut too early and inflation flared back up, it could damage credibility and force even more tightening later. If it waits too long and the economy slows sharply, unemployment could rise quickly. So the Fed is balancing two risks, and investors are trying to guess which risk the Fed fears more at any given time.

How Jobs Data Changes Rate-Cut Timing

A strong jobs report can change expectations in a hurry because it affects the “soft landing” story. If hiring stays healthy and unemployment stays relatively low, it suggests the economy can handle current rates. That tends to delay the first cut. Reuters noted that after the jobs report, Citi shifted its cut call later—moving to April from March.

Investors then update their own probabilities in tools and markets tied to Fed decisions. For example, Reuters reported that traders were pricing in a 94%+ chance that the Fed would keep rates unchanged at its March policy meeting, based on the CME FedWatch tool.

If you’d like to see how traders update these probabilities in real time, you can review the CME’s FedWatch page here:CME FedWatch Tool.

The Leadership Factor: Powell’s Term, a Possible Successor, and Market Nervousness

One of the most attention-grabbing details in the Reuters report is the timing around the Fed chair. Reuters wrote that the Fed could keep rates unchanged through Chair Jerome Powell’s term ending in May, and that a cut could come immediately afterward in June, based on a Reuters poll.

Reuters also mentioned economists’ warnings that policy under Powell’s likely successor, Kevin Warsh, could become “too loose.” This matters because markets don’t just price the next meeting—they price the whole “reaction function,” meaning how leadership might respond to inflation, unemployment, and growth over time.

Why Leadership Transitions Can Move Markets

The Fed is designed to be independent, but investors still pay close attention to shifts in leadership because every chair has a style:

• Communication style: Some chairs prefer very clear guidance; others keep options open.
• Risk tolerance: Some prioritize fighting inflation even if it slows growth; others focus more on employment risk.
• Policy pacing: Even when the destination is similar, the speed can differ—slow and steady vs. faster moves.

When a leadership change is expected, markets may become more sensitive to data releases, because traders try to anticipate how the next team might interpret the same numbers. That can lead to bigger swings in bond yields and currency markets, even before any policy actually changes.

Where the Biggest Brokerages Differ: Cuts in 2026 vs. Hike in 2027

The headline takeaway is that many major firms see the next cut around mid-2026. But the Reuters report also made clear that not everyone agrees on the direction beyond that. J.P. Morgan’s view that the next move could be a hike in 2027 is a reminder that the “rate cycle” isn’t just about going down.

How could that happen? Here are a few simple, realistic pathways—without assuming any single one will occur:

• Inflation re-accelerates: If price growth speeds up again due to energy costs, supply shocks, or strong demand, the Fed might need to tighten later.
• Growth stays hotter than expected: If spending and investment remain strong, policy could stay restrictive longer—or even turn tighter again.
• Financial conditions loosen too much: If markets rally hard, borrowing gets easier, and that can work against inflation cooling.

This is why forecasts often cluster around a “base case” (like a first cut in June 2026), but still leave room for tails—less likely outcomes that can still be important for risk management.

What This Means for Everyday Borrowers: Mortgages, Credit Cards, and Auto Loans

It’s easy to hear “Fed cuts in mid-2026” and assume your loan rates will drop immediately. Real life is messier. The Fed controls a short-term policy rate, and many consumer rates depend on longer-term bond yields, bank competition, and credit risk.

Mortgages

U.S. mortgage rates often move with longer-term Treasury yields and expectations about inflation. If markets become convinced that cuts are coming and inflation will keep cooling, mortgage rates may drift down even before the Fed cuts. But if inflation risks rise, mortgage rates may stay high.

Credit cards

Credit card rates are usually tied more directly to short-term benchmarks. If the Fed holds steady, card rates often remain elevated. Cuts can eventually reduce them, but the impact may be gradual and depends on the card issuer.

Auto loans and personal loans

These can fall somewhere in between. They’re influenced by short-term rates, but also by lenders’ risk appetite and the health of the consumer. If unemployment rises later, lenders may tighten standards even if the Fed cuts.

What It Means for Investors: Stocks, Bonds, and the Dollar

Rate expectations act like gravity for markets. They affect what investors are willing to pay for future earnings, how attractive bonds look compared to stocks, and how global money flows into or out of the U.S.

Bonds

If rate cuts are expected in mid-2026, bond investors may try to position early by buying longer-term bonds, which can push yields down. But strong jobs data—like the January report mentioned by Reuters—can do the opposite by making cuts feel further away.

Stocks

Stocks often like the idea of lower rates because it can support valuations and reduce borrowing costs. However, if cuts only come because the economy weakens sharply, stocks can struggle. The “best case” for equities is often a gentle slowdown: inflation cools, rates ease, and earnings remain stable.

The U.S. dollar

Higher U.S. rates relative to other countries can support the dollar. If markets expect the Fed to cut earlier than other central banks, the dollar can soften. If the Fed stays higher for longer, the dollar can remain firm.

Key Dates and Signals to Watch in 2026

Forecasts like “June 2026” are not promises. They’re best understood as a snapshot of what looks most likely given current data. Here are the signals that could move expectations:

1) Monthly inflation prints

If inflation shows clear, steady progress downward, cuts become easier to justify. If inflation stalls, the Fed can wait longer.

2) Labor market trends

The Reuters report emphasized labor market stability: job growth accelerated and unemployment fell to 4.3%. If unemployment rises meaningfully, markets may pull cut expectations forward.

3) Fed communication

Speeches, meeting statements, and press conferences can reshape expectations quickly—especially when the Fed signals how it weighs inflation versus employment.

4) Market-based probabilities

Tools like CME FedWatch reflect how traders are pricing meeting outcomes. Reuters reported a 94%+ probability of no change at the March meeting. Big shifts in these probabilities can hint at changing narratives.

Why These Forecasts Matter Globally (Not Just in the U.S.)

The Fed is not “the world’s central bank,” but it often feels like it because U.S. rates influence global borrowing costs, capital flows, and emerging-market currencies. When investors can earn higher yields in U.S. assets, money may flow into dollars and Treasuries. When U.S. yields fall, investors may seek higher returns elsewhere, changing currency and bond dynamics around the world.

For countries and companies that borrow in dollars, a later start to Fed cuts can mean higher financing costs for longer. For exporters selling into the U.S., a stronger dollar can change competitiveness. In short: even people far from Wall Street can feel the ripple effects.

FAQs About Fed Rate Cuts in Mid-2026

1) Are rate cuts in June 2026 guaranteed?

No. They are forecasts based on current conditions. Reuters reported that major brokerages such as Goldman Sachs and Morgan Stanley expect a cut in June, but the Fed’s decisions will depend on inflation, jobs, and broader financial conditions.

2) Why did strong job growth push some cut expectations later?

Strong job growth suggests the economy can handle higher rates and may keep inflation pressure alive. Reuters noted that job growth accelerated and unemployment fell to 4.3%, giving the Fed room to wait while monitoring inflation.

3) What did Citigroup change after the jobs report?

Reuters reported that Citigroup pushed back its expectation for the first Fed rate cut of the year to April, from a prior call of March, after the jobs report.

4) Why does J.P. Morgan see a hike in 2027?

According to Reuters, J.P. Morgan’s forecast differs from others, with the bank seeing the next move as a hike in 2027. That kind of view can reflect concerns that inflation could remain sticky or that growth could stay strong enough to require tighter policy later.

5) What does “94% chance of no change” mean?

Reuters cited the CME FedWatch tool showing traders were betting on a more than 94% chance the Fed would keep rates unchanged at the March policy meeting. This is a market-based estimate—useful, but not a promise.

6) Will my loan rates drop as soon as the Fed cuts?

Not necessarily. Some rates respond quickly (like certain variable-rate products), while others depend more on long-term bond yields and lender policies. Markets can also “price in” cuts early, meaning some rates may shift before the Fed actually moves.

Conclusion: A Mid-2026 Cut Is the New “Center of Gravity,” But the Data Still Rules

The Reuters report paints a clear picture of where many big Wall Street institutions stand right now: a growing expectation that the Fed’s next cut could arrive around June 2026, after a period of holding steady while inflation and employment trends become clearer. Strong jobs data and a lower unemployment rate have reinforced the case for patience, while the gap between forecasts—like J.P. Morgan’s 2027 hike call—shows that uncertainty remains.

For readers, the practical takeaway is simple: rate forecasts are not just Wall Street chatter. They can shape borrowing costs, influence market sentiment, and affect financial decisions long before the Fed makes its move. If you want to track how expectations evolve, keep an eye on inflation, labor market reports, and market-implied probabilities—because in the world of interest rates, the story can change fast.

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