NEW YORK — The Federal Reserve’s brief experiment with rate cuts may already be over, according to JPMorgan, as a renewed oil-price shock and stickier inflation expectations force investors to reassess how far the central bank can go in easing policy this year.
In a report cited Thursday by the Bank of Korea’s New York office, JPMorgan scrapped its lone projected rate cut for 2026 and now expects no further reductions at all, arguing that the Fed’s easing cycle effectively ended in December.
The shift underscores a growing view on Wall Street that, even under a new chair, the Fed is likely to keep its benchmark rate on hold for an extended period rather than resume the kind of steady cuts many investors had hoped for.
JPMorgan pointed to the minutes of the Fed’s January policy meeting to support its call. “Last December, ‘most’ [participants] believed that further rate cuts would follow if inflation eased as expected,” the bank noted. “This time, only ‘several’ expected further cuts under the same conditions.” That subtle change in language, the firm argued, signals a more cautious central bank.
The bank also highlighted that Fed officials nudged their inflation projections higher and stressed that price gains are “likely to remain above the target level for the time being.” With “almost all” policymakers now judging the policy rate to be within the estimated range of neutral, JPMorgan said, any upward drift in the inflation outlook “could be a reason to oppose monetary easing.”
Other major investment banks are not going as far as JPMorgan but are converging on a similar direction: fewer cuts, later, and likely capped well before markets had once imagined.
Citi and TD still see three rate reductions this year, while Barclays, Bank of America, Goldman Sachs, Morgan Stanley, Nomura and Wells Fargo expect two. Deutsche Bank, at the dovish end of that spectrum, projects just a single cut — and only after clearer evidence that inflation is retreating.
Futures markets have been moving in the same direction. The implied Fed policy rate for September has climbed steadily, from 3.13 percent in early December to 3.17 percent in early January and 3.25 percent in early February, suggesting traders are pricing in a higher-for-longer stance.
A resurgent oil market is adding to the pressure. Rising crude prices, driven in part by fears that U.S. and Israeli strikes on Iran could disrupt supplies, are feeding fresh anxiety that inflation may reaccelerate or at least prove more stubborn than central bankers anticipated.
“The oil price shock will bring more uncertainty to the outlook,” Deutsche Bank warned in a report released Wednesday, adding that it would “further reinforce the Fed’s situation of freezing interest rates.” Even if a slowdown in inflation is confirmed in the second half of the year, the bank said, it still expects the Fed to cut rates only once.
For now, solid U.S. employment data are giving the central bank room to wait. The Bank of Korea, summarizing the consensus among global banks, said most expect the Fed to “freeze the policy rate for the time being due to solid employment indicators.”
But the focus inside the Fed — and among its watchers — is shifting. With the labor market holding up, officials are increasingly fixated on whether inflation has truly peaked and is on a sustainable path back to the 2 percent target. “As the focus is more on whether inflation has peaked than on the labor market as a condition for further rate cuts, the importance of inflation data releases will increase,” the Bank of Korea noted.
That puts upcoming inflation reports squarely at the center of the policy debate. Each new data point on prices — and on the trajectory of oil — is now poised to carry outsized weight in determining whether December really was the end of the Fed’s rate-cutting experiment, or merely a pause before another, more cautious round of easing. For JPMorgan, at least, the verdict is already in.
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