Rate Cuts Possible in 2026—If Inflation Falls and Geopolitics Cooperate

Traders are now holding back on major moves until clearer signals emerge on inflation and geopolitical developments. The Federal Reserve held the federal funds rate at 3.5% to 3.75% in April 2026. Policymakers indicated that rate cuts could occur in 2026 if inflation continues to trend toward the Fed's 2% target. Some Fed officials support rate cuts amid slowing job growth, while others warn of potential hikes if inflation remains elevated. Geopolitical tensions involving Iran are creating uncertainty for supply chains, energy prices, and economic stability. The Fed's uncertainty has led to a 'wait and see' approach ahead of the next policy meeting. Market pricing as of April 2026 gives a 75.6% probability that rates will remain unchanged through the end of 2026. A rate cut would increase liquidity, potentially boosting risk assets like cryptocurrencies. The December 2025 rate cut of 25 basis points triggered a surge in crypto market activity.