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 throughout 2026, and the Fed’s next move will be a 25 basis point rate hike in the third quarter of 2027, according to Yahoo Finance. This would bring the upper band of the federal funds rate to 4.00%. The current rate is between 3.50% and 3.75%.
The forecast puts JPMorgan squarely at odds with the Fed’s own projections and with most of Wall Street, and the gap is not narrowing as the Iran war keeps energy prices elevated and inflation persistent.
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 exceed the Fed’s 2% target. Unemployment stands at 4.4% and core inflation has not fallen fast enough to give the Federal Reserve the cover it needs to act.
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“We have an inflation problem,” Feroli said on CNBC, adding that it is not “insoluble.” Given what he described as a “fairly favorable economy,” he said inflation “should improve over time.”
The Iran war adds a new layer of complexity. “The conflict in the Middle East adds a whole new aspect,” Feroli said on CNBC. Oil prices have risen since the conflict began in late February, adding upward pressure on inflation just when the central bank expected it to calm down. The Federal Reserve itself acknowledged the uncertainty in its March statement, noting that “the implications of events in the Middle East for the U.S. economy are uncertain,” according to CNBC.
Even the chairman of the Federal Reserve is hedging. Jerome Powell said in his March press conference that the one-time rate cut the Fed had planned for 2026 was not guaranteed. “If we don’t see that progress, then we won’t see the rate cut,” he said.
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Feroli was also careful to point out that his call was not set in stone. “If the labor market weakens again in the coming months, or if inflation falls materially, the Federal Reserve could still ease its policies later this year,” he wrote, according to JPMorgan.
The markets are increasingly moving in Feroli’s direction. CME Group’s FedWatch tool, which tracks rate expectations using futures prices, puts the probability of a December rate cut at just 27.5%. At one point in late March, futures traders briefly priced in a 52% chance of a rate hike by the end of 2026.
