JPMorgan has a stark message on the next Fed rate cut

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 through all of 2026, with the Fed’s next move being a 25 basis point rate hike in the third quarter of 2027, according to Yahoo Finance. That would bring the upper band of the federal funds rate to 4.00%. The current rate sits at 3.50% to 3.75%.

The forecast puts JPMorgan squarely at odds with the Federal Reserve’s own projections and with most of Wall Street, and the gap is not getting any smaller as the Iran war keeps energy prices elevated and inflation stubborn.

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 run above the Fed’s 2% target. Unemployment stands at 4.4% and core inflation has not fallen quickly enough to give the Fed the cover it needs to act.

Related: Wall Street resets recession bets despite Fed stagflation message

“We have an inflation problem,” Feroli said on CNBC, while adding that it was not “intractable.” Given what he described as a “pretty favorable economy,” he said inflation “should get better over time.”

The Iran war adds a new layer of complexity. “The conflict in the Middle East adds a whole new wrinkle,” Feroli said on CNBC. Oil prices have surged since the conflict began in late February, adding upward pressure on inflation just as the central bank was hoping to see it cool. The Fed itself acknowledged the uncertainty in its March statement, noting that “the implications of developments in the Middle East for the U.S. economy are uncertain,” according to CNBC.

Even the Fed chair is hedging. Jerome Powell said at his March press conference that the single rate cut the Fed penciled in for 2026 was not guaranteed. “If we don’t see that progress, then you won’t see the rate cut,” he said.

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Feroli was also careful to note his call was not set in stone. “If the labor market weakens again in the coming months, or if inflation falls materially, the Fed could still ease later this year,” he wrote, according to JPMorgan.

Markets are increasingly moving in Feroli’s direction. The CME Group FedWatch Tool, which tracks rate expectations using futures pricing, puts the likelihood of a December rate cut at just 27.5%. At one point in late March, futures traders briefly priced in a 52% probability of a rate hike by the end of 2026.

The Fed’s next meeting is April 29. Few expect any action. The question now is not whether the Fed will hold, but for how long.

JPMorgan is the most hawkish voice on Wall Street right now, but others have been moving in the same direction. Goldman Sachs, Barclays, and Morgan Stanley have all pushed their rate cut expectations back from earlier in the year, though they still anticipate the Fed will ease at some point in 2026. Goldman Sachs currently expects two 25 basis point cuts in June and September 2026, according to Mortgage Professional.

JPMorgan: zero cuts in 2026, 25bps hike in Q3 2027, according to Yahoo Finance

Goldman Sachs: two cuts, in June and September 2026, according to Mortgage Professional

Barclays and Morgan Stanley: cuts pushed back to mid-2026, according to Yahoo Finance

Federal Reserve dot plot: one 25bps cut projected for 2026, one for 2027, according to CNBC

CME FedWatch: 27.5% probability of a December cut, according to CME Group

For borrowers, a prolonged hold means higher costs across the board. Mortgage rates, auto loans, credit card rates, and personal loan costs all stay elevated for longer. The 30-year fixed mortgage rate is likely to remain above 6% throughout 2026 if JPMorgan’s forecast proves correct, according to Yahoo Finance.

There is also a leadership dimension to watch. Powell’s term as Fed chair expires in May 2026, and President Trump has nominated former Fed Governor Kevin Warsh as his replacement. But Feroli cautioned that even a more dovish incoming chair would face limits in shifting policy. “As a Fed chair cannot dictate policy decisions,” the new chair “would have to build consensus on the FOMC,” he wrote, according to JPMorgan.

With the Iran war still unresolved, oil prices still elevated, and inflation still sticky, the conditions that would allow the Fed to cut simply have not materialized. JPMorgan’s view is that they may not for a long time yet.

Related: Morgan Stanley issues stark warning on Fed rate outlook

This story was originally published by TheStreet on Apr 6, 2026, where it first appeared in the Fed section. Add TheStreet as a Preferred Source by clicking here.