Federal Reserve’s Limited Rate Cuts Expected in 2026, Say BlackRock Strategists

BlackRock strategists are forecasting a restrained pace of Federal Reserve interest-rate cuts in 2026, suggesting that the U.S. central bank has limited room for easing unless economic conditions deteriorate significantly.

According to the latest BlackRock Investment Institute analysis, the Fed’s current rate-cut cycle is viewed more as a normalization of policy than a shift toward aggressive monetary easing. With roughly 175 basis points of rate reductions already delivered since late 2024, the federal funds rate is approaching estimates of neutral, leaving modest room for further cuts next year absent a sharp downturn in the labor market or economic activity. This implies only a few cuts — if any — may occur in 2026 rather than a large easing cycle.

BlackRock’s view aligns with caution from other strategists who believe the Fed will weigh incoming inflation and labor data carefully before adjusting policy further, rather than pushing deeply into accommodative territory.

Why it matters:

Rate expectation shift: Markets are adjusting to the idea that major easing may be over or limited in scope.

Equity and credit implications: A slower pace of cuts can influence risk-asset pricing through 2026.

Policy uncertainty: Investors will closely monitor incoming economic data for clues on timing and magnitude of future cuts.

Bottom line: BlackRock strategists see only modest further rate cuts in 2026, reinforcing a narrative of cautious monetary easing ahead.