Fed To Wait And See How Economy Evolves: Powell Refrains From Sharing 2026 Rate Cut Path

The US Federal Reserve is well-positioned to "wait and see" how the economy evolves, and decide on the monetary policy on a meeting-to-meeting basis, Chair Jerome Powell said on Wednesday.

Powell's statement, at a press briefing, came shortly after the Fed slashed the benchmark lending rates for a third consecutive time, lowering it to 3.5%-3.75% target range.

"The adjustments to our policy stance since September bring it within a range of plausible estimates of neutral and leave us well positioned to determine the extent and timing of additional adjustments," said Powell, whose term as the Fed chair expires in May 2026. He would preside over the next Federal Open Market Committee (FOMC) meeting, scheduled on Jan. 27-28.

The next rate decision would depend on a slew of economic data, which are yet to be released due to the federal government shutdown in October and early November. This includes the job and inflation data for November, which is scheduled to be out next week.

There will be a “great deal of data” between now and the January meeting, Powell said, adding that this data will factor into their thinking.

Shortly before Powell addressed the press, the FOMC released its projection for the period ahead. The "dot plot" showed a median forecast of one quarter point rate cut in 2026, followed by a similar reduction in 2027, which would lower the rates to a target range of about 3%.

However, a sharp split was seen in terms of individual expectations. While seven officials pencilled in no rate cuts for 2026, four officials see at least one rate cut, and four others expect three quarter point cuts next year.

In its statement issued following the two-day FOMC meet, the committee said inflation has moved up since earlier in the year and "remains somewhat elevated". Simultaneously, it pointed towards a moderation in economic activity, marked by downside risks to employment.

"Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September," it noted.

In this backdrop, Powell clarified during the press briefing that a rate hike was all but ruled out for now. "I don't think that a rate hike is anybody's base case at this point... What you see is some people feel we should stop here and that we're at the right place and just wait. Some people feel like we should cut once or more this year or next year," he said.