Deutsche Bank sees no Fed rate cuts in 2026 as oil-linked inflation and strong labour market limit room to move

Households and businesses should expect borrowing costs to remain elevated through 2026, delaying relief on loans and credit. Deutsche Bank now expects the Federal Reserve to hold interest rates unchanged in 2026, reversing its earlier forecast of a 25-basis-point cut in September. The shift reflects rising oil-driven inflation risks tied to the Middle East war, which have already added to price pressures, according to several Fed officials. Resilient economic growth and a tight labour market are further limiting the central bank’s ability to ease policy. Rate cuts this year would require measurable weakening in labour market conditions along with softer inflation, strategists at Deutsche Bank said. The Fed kept its target rate range at 3.5% to 3.75% in mid-March and pencilled in one additional cut later this year, though money market pricing shows a 69% probability it will not cut rates by the end of 2026. While brokerages including Goldman Sachs and Morgan Stanley still expect two rate cuts starting in September, Deutsche Bank sees no room for cuts next year under current conditions. The central bank’s next meeting is scheduled for April 28 to 29.