According to TD Securities analysts Oscar Munoz and Eli Nir, the Federal Reserve is expected to keep the Fed funds rate on hold throughout 2026 as US economic growth remains sideways and inflation stays elevated [1]. The analysts note that the recent jobs report reduces the risk of a July rate hike, with underlying employment trends described as healthy, which allows the Fed to maintain its current policy stance while focusing on its inflation mandate [1].
The report highlights that the lower risk of acceleration in the labor market should effectively close the door to a July rate hike [1]. The upcoming FOMC minutes may provide further insight into the policy discussion, but there is a possibility that forward guidance will be limited as part of Chair Warsh's efforts to reduce such communication [1]. Additionally, Fed Governor Waller's participation in a panel on Monday is identified as a key event, as he has not commented on future policy since the June FOMC meeting; his continued silence could indicate alignment with Warsh's approach to limited forward guidance [1].
TD Securities expects the Fed to remain on hold over their forecast horizon, with inflation projected to stay high for the rest of the year and the labor market having stabilized [1]. The analysts believe that if the Fed were to make a policy move this year, it is more likely to be a hike rather than a cut, emphasizing the increased importance of data dependence in determining the future path of monetary policy under the current leadership [1].
CONCLUSION
TD Securities anticipates the Federal Reserve will maintain a data-dependent hold on interest rates, with any policy change this year more likely to be a hike than a cut. The market should expect limited forward guidance and a continued focus on inflation as the primary mandate.