Rabobank’s Senior US Strategist Philip Marey reports that the Federal Open Market Committee (FOMC) left the federal funds rate unchanged in March and continues to project only one rate cut in 2026, despite raising its inflation and growth forecasts [1]. Rabobank has revised its own expectations, now anticipating two rate cuts in 2026, scheduled for September and December, compared to its previous forecast of three cuts [1]. The adjustment comes in response to the inflationary impact of the ongoing conflict with Iran, which has led Rabobank to drop one rate cut from its forecast [1].
Marey notes that the FOMC's reaction to the temporary rise in energy prices caused by the Iran conflict has been relatively sanguine, with the Committee still expecting to make one rate cut this year, indicating a willingness to look through short-term inflationary pressures [1]. Rabobank's revised forecast remains more dovish than the market consensus, and Marey highlights that if Warsh becomes the new Fed Chair, he may advocate for more than one cut [1].
Rabobank warns that further escalation in the Iran conflict could result in another rate cut being removed from its 2026 profile, suggesting that the outlook for monetary easing is highly dependent on geopolitical developments [1]. Prior to the conflict, Rabobank had expected three rate cuts in 2026, specifically in June, September, and October, but now sees the risk skewed toward fewer and later cuts [1].
No immediate market reactions or analyst opinions beyond Rabobank's own projections are discussed in the article. The forward-looking statements emphasize the uncertainty surrounding the Fed's policy path, contingent on the evolution of the Iran conflict and potential changes in Fed leadership [1].
CONCLUSION
Rabobank has reduced its forecast for Fed rate cuts in 2026 to two, citing the inflationary effects of the Iran conflict and the FOMC's cautious stance. The outlook remains uncertain, with further escalation potentially leading to even fewer cuts. Rabobank's projections are more dovish than market consensus, but future policy decisions will depend on geopolitical developments and possible changes in Fed leadership.