Natixis Forecasts Fed to Hold Interest Rates Steady Through 2026

The Federal Reserve is expected to maintain its current policy rate at next week's meeting and throughout 2026, according to economists at Natixis. The assessment comes from a Natixis FOMC preview authored by Christopher Hodge and Selin Aker.

Recent data has provided the Federal Open Market Committee with additional flexibility, allowing them to maintain their current policy rate. However, this decision is not expected to be unanimous, as some members are leaning toward a potential rate increase due to concerns about inflation.

Notably, inflation data since the June meeting was described as encouraging, with the June headline Consumer Price Index reading declining 0.4% on a monthly basis, largely due to a sharp drop in energy prices following a ceasefire agreement between the United States and Iran.

The authors expect the Fed to wait for clearer evidence that inflationary pressures are driven by cyclical rather than exogenous forces before making any policy changes. They anticipate an extended pause in interest rate hikes, citing cautious optimism about inflation's trajectory.