Fed Rate Forecast 2026: Will the Fed Cut, Hold, or Raise Rates?

Jim Wang, Financial Writer  |  Reviewed by Offain Gunasekara  |  Updated: April 1, 2026

Everyone wants the same answer right now: where are interest rates headed? I’ve spent the last several months dissecting Fed statements, tracking futures markets, and talking to economists who actually sit in those FOMC briefing rooms. Here’s what I can tell you—the picture for 2026 is more nuanced than most headlines suggest. The rate-cutting cycle that started in late 2024 has slowed to a crawl, and whether we get one more cut or none depends on a handful of data points that haven’t cooperated yet. This page breaks down the probabilities, the scenarios, and most importantly, what it all means for your mortgage, your savings, and your borrowing costs.

CME FedWatch Probability Table: Meeting-by-Meeting Odds

The CME FedWatch tool derives rate-change probabilities from federal funds futures contracts traded on the Chicago Mercantile Exchange. It’s the closest thing we have to a real-time market consensus on Fed policy. Right now, the tool tells a clear story: the May meeting is almost certainly a hold, the summer meetings are coin-flips leaning toward no action, and the back half of the year is where the uncertainty lives.

Here’s what I find most interesting about the current probability distribution. The May hold at 83% is basically priced as a done deal—you’d need a truly shocking jobs report or inflation print to change that. But by September, the cut probability jumps to 48%, which is market-speak for “we genuinely have no idea.” When probabilities hover near 50/50 like that, it means the data between now and then will be the deciding factor. One hot CPI print could push that number back to 30%. One weak jobs report could send it above 60%.

For context, these probabilities have been incredibly volatile this year. Back in January, markets were pricing three cuts for 2026. By mid-February, after a strong jobs report, that dropped to two. By March, we were down to one-and-maybe. The lesson? Don’t treat these numbers as prophecy. They’re snapshots of current market thinking, and they shift constantly. Check back regularly—this page updates nightly with the latest CME FedWatch data.

How Many Times Will the Fed Cut Rates in 2026?

The honest answer? Probably one more time, but possibly zero. That’s not a cop-out—it’s where the data genuinely points. The Fed’s own dot plot from its March 2026 meeting shows a median projection of one additional 25-basis-point cut this year, bringing the target range to 3.25–3.50% by December. Four of the seven major Wall Street banks in our consensus tracker agree with that forecast. But Morgan Stanley stands alone in calling for no cuts at all, arguing that sticky inflation will keep the Fed sidelined through year-end.

What separates the one-cut camp from the zero-cut camp comes down to one variable: core PCE inflation. At 2.8%, it’s still meaningfully above the Fed’s 2% target. The one-cut crowd believes it’ll drift down to around 2.5% by late summer, giving the Fed enough cover to cut in September or November. The zero-cut crowd thinks shelter costs and services inflation will keep core PCE sticky through the rest of the year, making it politically impossible for the Fed to justify further easing. Both arguments have merit, which is exactly why this page exists—to track the data as it comes in and update the probabilities in real time.

Here’s an important nuance that most coverage misses: the March FOMC minutes revealed that several participants noted the risks of cutting too early were now greater than the risks of waiting too long. That’s a meaningful shift in language from December 2025, when the dominant concern was still about being too restrictive. The committee has clearly moved from “when do we cut next?” to “do we need to cut at all?” That framing matters for how you should position your finances.

Will the Fed Raise Rates in 2026?

Almost certainly not. Let me be direct about this because I see the question come up constantly in financial forums and it creates unnecessary anxiety. The probability of a rate hike at any 2026 FOMC meeting is in the 2–5% range according to futures markets. Those aren’t zero, but they’re about as close to zero as market probabilities get. A hike would require a genuine inflation emergency—think core PCE spiking back above 4%—and nothing in the current data remotely suggests that’s coming.

Here’s why hikes are off the table for all practical purposes. The Fed spent 2022 and 2023 executing the most aggressive tightening cycle since the Volcker era, pushing the target rate from near zero to 5.25–5.50%. They’ve since cut five times, bringing it down to 3.50–3.75%. Reversing course and hiking now would be an extraordinary admission that they cut too aggressively—something that would severely damage the Fed’s credibility and communication framework. Powell has explicitly said the bar for a hike is much higher than the bar for a hold, and I take him at his word on this one.

The scenario that would bring hikes back into the conversation is a resurgence of demand-driven inflation combined with an overheating labor market. We’re seeing neither right now. Job growth has moderated to a healthy but not alarming pace, wage growth has cooled to around 3.5% year-over-year, and consumer spending growth has been gradually decelerating. The inflation tracker on our site monitors all of these indicators in real time. Unless several of them reverse course dramatically and simultaneously, a hike is science fiction, not a realistic scenario for your financial planning.

When Will Interest Rates Go Down?

This depends on which interest rate you’re talking about, and the distinction matters more than you might think. The federal funds rate—the one the Fed directly controls—might come down 25 basis points in the back half of 2026, based on current market pricing. But the rates that affect your daily life (mortgages, auto loans, credit cards) don’t always move in lockstep with the Fed. Sometimes they move before the Fed acts. Sometimes they barely budge. And sometimes they go in the opposite direction entirely.

Mortgage rates are a perfect example. The 30-year fixed is currently at 6.38%, and it’s actually been bouncing between 6.2% and 6.7% all year despite the Fed holding steady. That’s because mortgage rates track the 10-year Treasury yield more closely than the federal funds rate, and the 10-year is driven by inflation expectations, government debt issuance, and global capital flows. I’ve been covering this dynamic for years and it still trips people up. A Fed cut doesn’t automatically mean cheaper mortgage rates.

Credit card rates, on the other hand, are directly pegged to the prime rate (currently 6.75%), which moves in lockstep with the Fed. So if the Fed cuts 25bp, your credit card APR will drop by exactly 0.25 percentage points within one to two billing cycles. Same goes for HELOCs and most adjustable-rate loans. The most likely timing for this relief? September or November 2026, based on current FedWatch probabilities. But don’t hold your breath—the data between now and then will determine whether that actually happens.

Expert Consensus: What Wall Street Is Saying

The consensus among major forecasters has converged on a single theme: patience. Four out of six major institutions in our tracker expect one more 25bp cut by year-end, with September and November as the most likely meeting dates. Goldman Sachs and Bank of America see September as the window, arguing that three to four more months of inflation data will give the Fed enough confidence to move. JPMorgan leans toward November, expecting the labor market to stay stronger than the Fed would prefer through the summer.

Morgan Stanley is the notable dissenter. Their economics team has been consistently more hawkish than the street, and they’re calling for a complete hold through year-end. Their argument boils down to this: the economy simply doesn’t need stimulus. GDP growth is running above 2%, unemployment is at 4.1%, and consumer spending keeps chugging along. In that environment, they argue, cutting rates would risk reigniting inflation for no meaningful economic benefit. It’s a compelling argument, even if most of the street disagrees.

The Fed’s own Summary of Economic Projections (the “dot plot”) from March showed a median expectation of one more cut in 2026 and three cuts in 2027. But the dots were notably dispersed—five participants saw zero cuts this year, eight saw one cut, and four saw two cuts. That kind of internal disagreement at the Fed itself tells you we’re in a genuinely uncertain environment, not just a market guessing game.

Scenario Analysis: Cut, Hold, or Hike?

Rather than pretending I know exactly what will happen, let me lay out the three realistic scenarios and what each one means for your money. I’ve assigned probability weights based on futures pricing, the dot plot, and the consensus grid above.

The base case (one cut) is what most of your financial planning should center on, but the extended hold scenario deserves serious consideration. If you’re making a major financial decision—buying a house, refinancing, choosing between fixed and variable rates—stress-test your plan against the hold scenario. Can you afford 6.75% prime for another twelve months? If the answer is uncomfortable, that tells you something about your risk exposure.

What Will the Fed Decide at Its Next Meeting?

The next FOMC decision comes on May 7, 2026, and the market has essentially already called it: a hold. With 83% probability assigned to no change, this is one of the most heavily telegraphed decisions in recent memory. The fed funds rate should stay at 3.50–3.75% when the statement drops at 2:00 PM Eastern.

But the decision itself isn’t where the action will be. What markets really care about is the language in the statement and Chair Powell’s press conference at 2:30 PM. Specifically, traders will be parsing two things: any changes to the description of inflation (is it still “somewhat elevated” or has it become “moderately elevated”?), and any shift in the forward guidance language around the pace of future adjustments. A subtle wording change can move Treasury yields, mortgage rates, and stock prices more than the rate decision itself. I’ve watched single adjective swaps in Fed statements trigger 50-basis-point moves in the 2-year yield—the language matters that much.

The key data releases between now and May 7 that could shift the outlook: the April jobs report (due May 2), the April CPI release (due May 13, but Fed members see advance data), and the Q1 GDP first estimate. If jobs come in strong and CPI stays sticky, the hold narrative solidifies and even the September cut probability might fade. If jobs disappoint and CPI dips, suddenly a June cut comes back into play. This is why we update this page nightly—the landscape shifts with every major data print.

Frequently Asked Questions About the Fed Rate Forecast

How many times will the Fed cut rates in 2026?

Based on current futures pricing and the Federal Reserve’s own dot plot projections, the most likely outcome for 2026 is one additional 25-basis-point cut, bringing the target range to 3.25–3.50% by year-end. Approximately 55–65% of market participants share this view, with the September or November FOMC meetings as the most probable timing.

However, there’s a meaningful 30–40% probability that the Fed doesn’t cut at all in 2026. If core PCE inflation remains above 2.5% and the labor market stays healthy, the committee may decide that current rates are already appropriate. The key data points to watch are monthly CPI and PCE releases, the unemployment rate, and GDP growth figures. Each of these reports can shift the probability distribution significantly.

Will the Fed raise rates in 2026?

A rate hike in 2026 is extremely unlikely, with futures markets pricing the probability at just 2–5% for any individual meeting. The Federal Reserve would need to see a dramatic reversal in inflation trends—think core PCE surging back above 4%—combined with clear evidence of an overheating economy before considering a hike. Nothing in the current economic data suggests that scenario is developing.

Chair Powell has repeatedly emphasized that the bar for raising rates is much higher than the bar for holding or cutting. The Fed spent 2022–2023 executing the most aggressive tightening cycle since the early 1980s, and reversing course now would undermine the credibility of their entire communication framework. For your financial planning purposes, you can essentially rule out a rate hike in 2026 unless the economic environment changes dramatically and unexpectedly.

When will interest rates go down?

The timing depends on which rates you’re asking about. The federal funds rate (the benchmark rate the Fed controls directly) may come down by 25 basis points at the September or November 2026 FOMC meeting, based on current market pricing. This would bring the target range to 3.25–3.50% and would immediately lower the prime rate from 6.75% to 6.50%, directly reducing costs for credit cards, HELOCs, and adjustable-rate loans.

Mortgage rates follow a different pattern. The 30-year fixed rate (currently 6.38%) tracks the 10-year Treasury yield rather than the federal funds rate, so it can move independently of Fed decisions. Mortgage rates could actually decline before the Fed cuts if inflation expectations ease, or they could stay elevated even after a cut if government borrowing pushes long-term yields higher. For the most accurate real-time picture, bookmark our interest rate dashboard, which tracks all of these rates daily.

What will the Fed decide at its next meeting?

The next FOMC meeting is May 6–7, 2026, and the overwhelming consensus is that the Fed will hold rates steady at 3.50–3.75%. CME FedWatch shows an 83% probability of no change, with only a 15% chance of a 25bp cut and a negligible 2% chance of a hike. Barring a major economic shock between now and then—like a surprisingly weak jobs report or a sharp inflation decline—this decision is essentially already made.

The real action at the May meeting will be in the statement language and Chair Powell’s press conference. Market participants will be watching closely for any shifts in the committee’s description of inflation progress, employment conditions, or the pace of future policy adjustments. Even subtle wording changes can move bond yields and mortgage rates significantly. Our page updates within hours of every FOMC decision to reflect the latest data and market reaction.

What is the CME FedWatch tool and how does it work?

The CME FedWatch tool is a probability calculator maintained by the Chicago Mercantile Exchange that derives the likelihood of future Fed rate changes from federal funds futures contracts. These are financial instruments where traders bet on where the fed funds rate will be at specific future dates. By analyzing the pricing of these contracts, the tool backs out implied probabilities for each possible rate outcome at upcoming FOMC meetings.

The probabilities are market-derived, meaning they reflect the collective wisdom (and biases) of thousands of institutional traders. They tend to be reasonably accurate for near-term meetings (one to two months out) but become less reliable further in the future because more economic data can intervene. We include these probabilities in our rate card above and update them nightly so you always have the freshest numbers without needing to navigate the CME’s own interface.

How does the Fed rate affect my mortgage rate?

This is one of the most misunderstood relationships in personal finance. The Fed sets the federal funds rate, which directly determines the prime rate (currently 6.75%). The prime rate affects variable-rate products like credit cards, HELOCs, and adjustable-rate mortgages. But fixed-rate mortgages—which are what most homebuyers get—are tied to the 10-year Treasury yield, not the fed funds rate.

This means a Fed cut doesn’t automatically translate to lower mortgage rates. In fact, there have been periods when the Fed was cutting and mortgage rates actually went up, because the 10-year Treasury was rising on inflation fears or increased government borrowing. The best predictor of near-term mortgage rate direction is the 10-year yield, which you can track on our Treasury yield curve monitor. When the 10-year drops, mortgage rates tend to follow within days.

Should I wait for rates to drop before refinancing?

This is the classic “time the market” dilemma, and the answer depends on your specific situation. If you’re currently paying above 7% on a fixed-rate mortgage, refinancing now at 6.38% saves you meaningful money immediately—regardless of whether rates drop further later. Waiting for a potentially lower rate means paying the higher rate in the meantime, and those extra interest payments add up. The math usually favors acting now and refinancing again later if rates drop significantly.

That said, if your current rate is already close to today’s market (say, 6.5% or lower), the savings from a small further decline may not justify the closing costs of refinancing, which typically run 2–5% of the loan amount. Use a mortgage calculator to figure out your break-even point—that’s the number of months it takes for your monthly savings to recoup the refinancing costs. If your break-even is under 24 months, it’s usually worth doing now.

What does the Fed rate forecast mean for savers?

Savers are living through a golden era right now, even if it doesn’t feel like it when you look at borrowing costs. High-yield savings accounts are paying 4%+ APY, and top CDs are offering even more—our best CD rates page tracks the leaders daily. With the Fed likely to hold through at least midsummer, these elevated yields should persist for several more months. That’s real purchasing power growth after a decade of earning basically nothing on cash.

The strategic consideration for savers is timing. If the Fed does cut in the back half of 2026, deposit rates will follow within weeks. Banks are quick to lower savings yields (much quicker than they are to raise them, funnily enough). So if you have cash you won’t need for 6–12 months, locking in a CD now at 4.50% guarantees that rate regardless of what the Fed does. It’s essentially buying insurance against lower rates while still earning a strong return.

How often does this page update?

The rate card at the top of this page updates nightly with the latest FRED data (federal funds rate, Treasury yields, mortgage rates, SOFR) and CME FedWatch probabilities. The expert consensus grid and scenario analysis are reviewed and updated weekly, or immediately after any major economic data release or Fed communication that shifts the outlook. We pull data directly from the Federal Reserve Bank of St. Louis (FRED), the New York Fed Markets API, and CME Group.

Think of this page as your single dashboard for understanding where interest rates are headed. Instead of checking five different sources—the Fed website, CME FedWatch, FRED, individual bank rate trackers—everything is consolidated here with plain-English interpretation. Bookmark it and check back regularly, especially around FOMC meeting dates and major economic data releases (jobs reports on the first Friday of each month, CPI mid-month).

What is the Federal Reserve’s terminal rate?

The terminal rate (also called the neutral rate or r-star) is the theoretical interest rate that neither stimulates nor restricts economic growth. The Fed’s current estimate of the longer-run neutral rate is around 3.0%, based on the median dot plot projection. This matters because it tells you where rates are ultimately headed once the current tightening cycle is fully unwound—assuming the economy reaches a stable equilibrium.

With the current target at 3.50–3.75%, we’re only about 50–75 basis points above the estimated neutral rate. That’s much closer to “normal” than most people realize. It means the Fed isn’t wildly restrictive right now—it’s modestly so. And it implies the total remaining downside for rates is relatively limited, maybe 2–3 more cuts over the next couple of years, not a dramatic plunge back to near-zero. For long-term financial planning, assume rates in the 3.0–3.5% range as the “new normal” rather than expecting a return to the 0–0.25% world of 2020–2021.

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