Although expectations for the Fed’s interest rate policy in 2026 suggest limited easing, statements by market participants and the Trump administration reveal divergent views on monetary policy.
BlackRock strategists Amanda Lynam and Dominic Bligh note that the Fed has already cut rates by a total of 175 basis points this cycle, moving it closer to neutral rates. The room for further aggressive rate cuts in 2026 is fairly limited unless there is significant weakness in the labor market, strategists say. LSEG data also shows that market prices reflect expectations for just two rate cuts in 2026.
On the other hand, the political and economic evaluation of the Fed also deserves attention. Trump administration officials said Tuesday that the U.S. economy could grow by 3%, a scenario that could prompt the Federal Reserve to continue lowering interest rates. The administration believes it can maintain strong growth without creating inflationary pressures.
In an interview, Joe LaBonna, an adviser to U.S. Treasury Secretary Scott Bessent, described the current economic outlook as “growth without inflation.” LaVogna said deregulation and pro-growth policies implemented under President Donald Trump’s administration increased capital investment and supported supply-side expansion. Lavorgna says if the economy continues to grow thanks to increased supply, there will be downward pressure on inflation.
*This is not investment advice.
