Fed Seen Holding Rates Until Mid-2026 Amid Economic Crosscurrents, Leadership Uncertainty

The Federal Reserve is widely expected to hold interest rates steady at its January 2026 meeting and through the first half of the year, as policymakers balance strong Q4 2025 GDP growth of 4.4% against a cooling labor market and inflation still above target at 2.7%. CME's FedWatch tool shows a 97% probability of no change this week. Analysts cite data delays from the 2025 government shutdown and political uncertainty, with a new Fed Chair likely appointed by President Trump in mid-2026. Bank of America and Goldman Sachs forecast two 25-basis-point cuts starting in June under a more dovish successor, while J.P. Morgan expects no cuts in 2026 and a potential hike in 2027. The 30-year mortgage rate recently fell to 6.06%, but strategists note long-term Treasury yields may remain elevated due to fiscal deficits, limiting further declines.