The Federal Reserve is now expected to deliver a hawkish rate cut, with projections placing the terminal rate between 3.25% and 3.5%.
The anticipated move suggests the Fed may reduce rates while maintaining a restrictive stance to prevent financial conditions from loosening too quickly.
Paul Eitelman, Senior Director and Chief Investment Strategist for North America at Russell Investments, noted that the current 10-year Treasury yield of 4.1% remains above their fair-value estimate. This discrepancy supports the case for strategic duration exposure in institutional portfolios, even under a moderated rate-cut cycle.
The outlook reflects a balanced positioning: easing enough to support growth and stabilize credit markets, but tight enough to avoid reigniting inflation. The rate path appears set to become a core driver of asset allocation decisions as markets transition toward 2026.
