JPMorgan predicted that the U.S. Federal Reserve’s next interest rate hike will likely be a rate hike and is unlikely to occur before the third quarter of 2027, contradicting some crypto analysts’ expectations that borrowing costs will fall sooner.
The world’s largest bank by market capitalization said on Friday it expects the Federal Reserve to keep interest rates unchanged this year with a target of 3.5% to 3.75%, before raising them by 25 basis points in the third quarter of 2027, according to Reuters.
This is in stark contrast to CME’s federal funds futures pricing, which shows traders are expecting two 25-basis point rate cuts this year. Many crypto analysts also say they expect borrowing costs to fall, encouraging greater risk-taking across the economy and financial markets. Bitcoin BTC$92,132.26are often thought of as purely exploiting fiat liquidity, making them more sensitive to interest rate expectations than traditional assets.
“After a difficult 2025, Bitcoin could make a comeback in 2026,” Lukman Otunuga, senior market analyst at FXTM, said in an email to CoinDesk. “Lower interest rates and less active supply could support prices.”
Most crypto bulls expect the next Fed chair to be more dovish than incumbent Jerome Powell, whose term ends in early May.
J.P. Morgan’s forecast for higher interest rates is consistent with a bullish chart pattern for 10-year Treasury yields that CoinDesk discussed in November. This pattern suggests benchmark bond yields could rise toward 6% over the next year or so. Currently, it is approximately 4.18%.
But the central bank insisted that rate cuts could be back on the table if the labor market weakens or inflation falls.
“If the labor market weakens again in the coming months or inflation declines significantly, the Fed could ease later this year,” JPMorgan analysts said.
“However, we expect the labor market to tighten by the second quarter and the process of defusing inflation to be much slower.”
Several other investment banks reassessed their prospects for rate cuts following Friday’s U.S. jobs report, which showed the unemployment rate fell to 4.4% in December.
Goldman Sachs and Barclays now expect rate cuts in September and December to follow June’s cut, compared to their previous rate cut forecasts in March and June.
