US Economy Won't Justify More Than One Fed Cut in 2026, Says Economist

Federal Reserve Policy Outlook

• 💡 The market anticipates a 25 basis point Fed rate cut this week, seen as a near certainty.
• ⚠️ However, policymakers are expected to signal a high bar for further easing beyond the initial cut.
• 🎯 Paul Hollingsworth of BNP Paribas 360 expects a relatively hawkish tone from Chair Powell, indicating the end of preemptive risk management cuts.

2026 Economic Forecast and Rate Cuts

• 📉 Hollingsworth forecasts one further Fed cut in the first quarter of next year, linked to an expected economic soft patch.
• 📊 Beyond this, he believes the bar for considerable further easing will be challenging due to resilient growth and relatively elevated inflation.
• 💰 The current accommodative monetary policy territory is expected to provide a floor for economic activity.
• 🚫 The US economy's fundamentals are not seen as justifying significant further easing in 2026.

Central Bank Decisions Beyond the US

• 🇪🇺 For the ECB, the next move is expected to be a hike, but not until the second half of 2027, reflecting a prolonged policy hold.
• 🇬🇧 The Bank of England has more scope to ease as its policy is still restrictive; a cut is expected in December, followed by one in Q1 next year, with further cuts anticipated in early 2027.