Global Brokerages Adjust Stance on U.S. Rate Cuts Amid Inflation Fears

Major global brokerages are revising their expectations for U.S. interest rate cuts in 2026, citing ongoing inflation risks and cautious policy decisions. Amid a divided Federal Reserve, many brokerages now foresee minimal or delayed rate cuts, highlighting a significant shift from earlier optimistic predictions.

In a significant shift, global brokerages are revising their predictions for U.S. interest rate cuts in 2026 due to persistent inflation and cautious policymaking. The change comes after the Federal Reserve's decision to hold rates steady, a decision that has led many, including Morgan Stanley, to retract expectations for rate reductions this year.

This marked a notable shift from earlier in the year when major firms like Goldman Sachs and Morgan Stanley projected two rate cuts, potentially beginning in June. The change highlights the influence of sustained economic growth and robust labor markets, coupled with inflation that continues to surpass the Federal Reserve's 2% target.

The discussion of rate adjustments comes as Jerome Powell steps down as chair of the Federal Open Market Committee, with Kevin Warsh set to succeed him. As traders anticipate a potential rate hike, brokerages emphasize timing risks over certainty when it comes to policy easing, reflecting the divided sentiment within the market.