Market Expects Only Two More Fed Rate Cuts in 2026 Amid Leadership Transition Uncertainty

The CNBC Fed Survey published on January 27, 2026, provides critical insight into market expectations for Federal Reserve policy at a pivotal moment when the central bank prepares for both a policy decision and a leadership transition. The survey of over 46 Wall Street economists and market strategists reveals a significant recalibration of rate expectations, suggesting that despite political pressure from the incoming Trump administration, the Fed is likely to maintain a measured approach to monetary easing [1].

The findings indicate that market participants have adjusted their expectations downward from more aggressive cut scenarios previously contemplated. While two quarter-point cuts are still expected for 2026, the absence of projected cuts for 2027 signals a belief that the Fed will achieve its inflation targets and establish a new policy equilibrium around the 3% funds rate level. This terminal rate expectation represents a substantial distance from the near-zero rates of the pandemic era and reflects the economic reality of persistent inflationary pressures and strong labor market conditions.

The survey’s economic projections paint a constructive picture for the U.S. economy. GDP growth expectations of 2.4% for 2026 suggest continued expansion, while the declining recession probability—from 30% in December to 23% currently—indicates improving confidence in the economic outlook. Inflation expectations remain slightly elevated, with CPI projected at 2.7% by year-end and 2.5% in 2027, suggesting the Fed’s 2% target remains within reach but has not yet been definitively achieved [1].

The political dimension of this survey is particularly significant given the timing. President Trump’s stated desire for a Fed chair who will “push for significant rate cuts” creates potential tension with the market’s more measured expectations. The survey found that 50% of respondents expect Kevin Warsh to be nominated as the next Fed chair, and an equal proportion believe Warsh would conduct policy independently of White House preferences [1]. This split view reflects ongoing uncertainty about how the Fed’s institutional independence will fare under the new administration.

: The survey results reveal a nuanced market view regarding Fed independence. While half of respondents believe the next chair would maintain independence from political pressure, the other half apparently harbors concerns about potential political influence. This divergence suggests that market participants are closely monitoring the nomination process and confirmation hearings for signals about the future direction of monetary policy.

: The combination of solid GDP growth expectations (2.4%), declining recession odds, and moderate inflation readings (2.7%) indicates that professional forecasters are pricing in continued economic resilience. This constructive baseline supports the case for a gradual, measured approach to rate cuts rather than aggressive easing.

: With 58% of respondents indicating that most tariff-driven inflationary effects are behind the economy, and the average tariff-related inflation impact estimated at approximately 0.3% for 2026, the market appears to be absorbing trade policy impacts without significant disruption [1]. This suggests that while tariffs remain a policy variable to monitor, their economic impact is being contained.

: A notable gap in the survey is the absence of specific timing projections for the two expected rate cuts. This uncertainty leaves open questions about when the Fed might act, with this week’s FOMC meeting (January 27-28) serving as an immediate focal point for forward guidance signals [2].

: The survey reflects a more hawkish stance than some market participants had anticipated, with potential for further upside in rate expectations. Some analysts, including those at Macquarie, have even flagged the possibility of rate hikes in 2026, suggesting significant uncertainty around the policy trajectory [3]. This divergence between survey expectations and potential outcomes represents a key risk factor for market positioning.

: Trump’s vocal desire for a more accommodative Fed policy creates potential for public friction between the White House and the central bank. Even if institutional independence is maintained in practice, sustained political pressure could introduce uncertainty into market expectations and potentially complicate the Fed’s communication strategy.

: While inflation expectations have moderated, the projection of 2.7% CPI by year-end remains above the Fed’s 2% target. Any signs of inflationary persistence could further constrain the Fed’s ability to deliver expected rate cuts or potentially force a reassessment of the policy path.

: The declining recession probability and solid growth projections suggest the potential for an increasingly rare economic soft landing. If realized, this outcome would validate the Fed’s calibrated approach to policy normalization and provide a favorable backdrop for risk assets.

: The revised rate trajectory—with rates expected to settle around 3%—provides a more defined framework for fixed-income portfolio construction. Investors can calibrate duration and yield curve positioning with greater confidence in the terminal rate environment.

: A moderate rate-cut path, rather than aggressive easing, may support a rotation toward quality and growth equities while maintaining exposure to rate-sensitive sectors. The constructive economic outlook suggests broadening market participation beyond the most rate-dependent segments.

The CNBC Fed Survey provides a comprehensive snapshot of market expectations as the Federal Reserve approaches a critical juncture involving both an imminent policy decision and an impending leadership transition. Survey respondents expect just two additional 25-basis-point rate cuts in 2026, with the Fed funds rate stabilizing around 3% through 2027 [1]. This calibrated expectation reflects growing confidence in the economic outlook—evidenced by GDP growth projections of 2.4% and declining recession odds—while acknowledging persistent inflationary pressures.

The market’s view on Fed independence under the Trump administration remains divided, with 50% of respondents believing the expected chair nominee Kevin Warsh would maintain policy autonomy despite White House pressure for more aggressive rate cuts. The upcoming FOMC meeting on January 27-28 will provide immediate insight into the Fed’s current stance, while the nomination process will offer further signals about the future direction of monetary policy.

Economic data trajectory, particularly upcoming employment and inflation readings in the first quarter of 2026, will serve as key inputs for any potential reassessment of the expected policy path. The interaction between political developments and institutional independence remains a critical monitoring focus for market participants navigating this transition period.