Federal Reserve policymakers are convening in Washington, with the Federal Open Market Committee (FOMC) scheduled to release a statement at 6am AEDT on Thursday. Following the statement, Jerome Powell will address the media thirty minutes later. Market participants are closely watching for any signals regarding future monetary policy. Recent economic data are informing expectations of a cautious stance from the committee.
TD Securities anticipates the FOMC will maintain current interest rates, signalling a shift towards a more neutral policy. The firm suggests recent data support a cautious approach, raising the bar for justifying rate cuts. While Chairman Powell is expected to remain noncommittal regarding near-term cuts, he may acknowledge that the median official still foresees easing measures later in the year.
Principal Asset Management’s Seema Shah projects two rate cuts in 2026, exceeding the single cut implied by the latest FOMC dot plot. These cuts are expected to bring rates just below the neutral range midpoint. The timing of these moves will depend on incoming data, with a potential increase in unemployment possibly accelerating the timeline into the first half of the year. eToro’s Zavier Wong noted a retreat in inflation after a mid-2025 peak, and suggests the US economy remains resilient, with a solid labour market and steady consumer spending, allowing the Fed to remain patient.
Vanguard senior economist Josh Hirt expects the Fed to proceed cautiously, forecasting only one rate cut in early 2026. This outlook is based on a stronger growth environment and monetary policy now within the range of neutral-rate estimates.
