A new reality has dawned on Wall Street: JPMorgan no longer expects the Federal Reserve to cut interest rates in 2026. Instead, the largest U.S. bank now predicts a 25 basis point rate hike in Q3 2027. At the beginning of January, JPMorgan was still betting on a 25 bps rate cut this year.

The shift comes after Friday’s U.S. labor market report, which showed a bigger-than-expected slowdown in job creation — but also a drop in unemployment to 4.4% and continued strong wage growth. In short, the labor market remains too strong for the Fed to justify easing.

“If the labor market weakens significantly in the coming months or inflation drops sharply, the Fed might still ease this year,” JPMorgan analysts noted.

Banks Rewriting Forecasts, Markets React

JPMorgan isn’t alone in its pivot. Goldman Sachs has also pushed its expected rate cuts from March and June to June and September, and lowered its 12-month U.S. recession probability from 30% to 20%.

“If the labor market stabilizes as expected, the Fed is likely to shift from risk management to normalization,” Goldman stated.

Barclays and Morgan Stanley also moved their Fed expectations to mid-2026. Morgan Stanley had previously forecast the first cut as early as January or April.

Market sentiment confirms the shift: the CME FedWatch tool now shows a 95% chance the Fed will hold rates at its January meeting, up from 86% before the jobs report.

Rising Tensions: Powell vs. Trump?

The story isn’t just economic — politics is heating up too. Fed Chair Jerome Powell claimed over the weekend that the Trump administration threatened him with criminal charges, allegedly related to expenses for the Fed’s building renovation. The stunning allegation has reignited the debate over the central bank’s independence.

Bitcoin Takes a Hit

Crypto markets didn’t take the news lightly. Bitcoin dropped back to $90,561, giving up recent gains and marking a 2.48% weekly loss. All eyes are now on Tuesday’s Consumer Price Index (CPI) data, which could offer clues to the Fed’s next move.

Summary

As the Fed signals tighter monetary policy and political tensions flare, investors are left searching for direction. Whether in equities or crypto, especially Bitcoin, the pressure from policy uncertainty is being felt immediately — and this could just be the start of a volatile chapter in 2026.


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