Global Banks Revise Fed Rate Outlook Amid Labor Market Strength

Shift in Monetary Policy Expectations

Major global financial institutions have significantly revised their projections for the Federal Reserve's monetary policy direction following recent robust US labor market data. The unexpected shift reflects growing uncertainty and divergence in market expectations regarding future interest rate movements.

J.P. Morgan's Revised Forecast

J.P. Morgan has withdrawn its previous rate cut prediction and now forecasts a 25 basis point rate hike in Q3 2027. This change follows the release of stronger-than-expected labor market data, suggesting that the US economy remains resilient despite various economic challenges ¹

Mixed Projections Among Major Banks

Other major financial institutions have also adjusted their forecasts:

• Macquarie predicts a rate hike in Q4 2026, maintaining a similar outlook to J.P. Morgan
• Barclays and Goldman Sachs have postponed their rate cut predictions to the second half of 2026
• The varied projections highlight the ongoing uncertainty surrounding the Fed's future policy decisions ²
  Source 2

  https://internasional.kontan.co.id/news/ketidakpastian-tinggi-institusi-keuangan-global-sulit-prediksi-arah-bunga-the-fed

Market Implications

The changing rate projections have significant implications for global financial markets. A potential rate hike in 2026 or 2027 would mark a substantial shift from current monetary policy settings, potentially affecting:

1. Currency markets: Strengthening USD
2. Equity markets: Potential volatility in rate-sensitive sectors
3. Bond markets: Changes in yield curve dynamics