2026 is expected to see a new Federal Reserve Chair and an anticipated decline in short-term interest rates across the Federal Open Market Committee’s eight scheduled meetings. That’s according to fixed income market expectations as assessed by the CME FedWatch Tool. The FOMC still has one scheduled decision left in 2025, on December 10. At that meeting rates may move lower with a chance they are held steady.
The Path For Interest Rates In 2026
By December 2026, the Federal Funds rate is expected to be around 3% that’s down from the current range of 3.75% to 4%. However, the range of outcomes is broad and rates could move as low as 2% or remain as high as 4% according to the more extreme outliers of fixed income market estimates. To the extent the FOMC does cut rates, the bulk of cuts may come in the first half of 2026. Policymakers’ own projections for rates in 2026 are a little more modest, with rates seen as remaining above 3% on most estimates. However, these projections were last updated in September and will be revised again in December.
The FOMC’s 2026 Meeting Calendar
The FOMC can set interest rates whenever it chooses, a power it has used in the past during economic emergencies. However, in a typical year the FOMC will follow the calendar of eight scheduled meetings in determining interest rates. For 2026, those decisions will come on: January 28, March 18, April 28, June 17, July 29, September 16, October 28 and December 9. The FOMC will update its Summary of Economic Projection at alternate meetings starting with March.
A New Fed Chair
President Trump is expected to nominate a Federal Reserve Chair to take office in 2026 who supports his drive for lower interest rates. Prediction markets, such as Kalshi, currently view Kevin Hassett as the most likely nominee. This may add impetus for lower rates in 2026. For example, Trump appointed Stephen Miran during 2025 and he has been consistent, so far, in voting for aggressively for lower rates. However, despite an expected new Fed Chair, the composition of the FOMC will remain broadly similar to past years. That means that monetary policy may not change too much because of a new Fed Chair.
Economic Data
Of course, ultimately the FOMC’s decision making will depend primarily on economic data. For now, inflation is a little above the Fed’s 2% annual target, but not dramatically so and unemployment is moving up, but perhaps not yet at a rate that is a cause for alarm. In this environment, the FOMC may continue to cut rates at a measured pace. However, if unemployment were to weaken sharply, then the Fed may be more aggressive in cutting interest rates. Equally, if inflation were to unexpectedly pick up, then the FOMC may be more cautious in adjusting rates. However, that scenario appears less likely.
For now, the most closely watched variable is jobs data. Some FOMC policymakers believe that rates should be moved lower as the job market is showing signs of slowing that could impact the broader economy. However, others believe that the softening of the jobs market is not any real cause for alarm. Of course, 2026 will bring more jobs data that will determine which perspective prevails.