Wells Fargo Sees Five Fed Rate Cuts by Mid-2026
The Federal Reserve has kept interest rates steady since January, but pressure is mounting for a shift in policy.
Markets largely expect no changes at next week’s meeting, yet bets on upcoming cuts continue to build.
According to futures pricing, there is an 88% probability of a 25 basis point reduction later this year, while the chances of a steeper 50 basis point move stand at just under 12%. Investors believe this could mark the beginning of a more extended easing cycle as economic headwinds grow.
Wells Fargo Forecasts Gradual Easing Cycle
Wells Fargo analysts now expect the Fed to deliver five rate cuts by June 2026. In a research note, the bank projected three quarter-point cuts before the end of this year, which would lower the federal funds target to a 3.50%-3.75% range.
Two additional 25 basis point moves are anticipated for March and June of 2026, potentially pushing the rate down to 3.00%-3.25%. The bank argued that a weakening U.S. labor market is the main reason policymakers may lean toward a softer stance, citing rising concerns about stability in employment trends.
Labor Market Weakness Driving Outlook
Analysts emphasized that the Fed’s decision-making will remain heavily tied to labor market performance. With recent data pointing to fragility in job creation, Wells Fargo believes the central bank is more likely to err on the side of easing in order to support growth and mitigate further economic strain.
For now, the path of policy remains dependent on incoming data, but expectations for a cycle of rate cuts are gaining traction as the Fed navigates a delicate balance between economic resilience and emerging vulnerabilities.
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