US-based investment bank JPMorgan shared a forecast that significantly diverges from the general market regarding expectations for the Federal Reserve's next interest rate move. According to the bank, the Fed's next step will be an interest rate increase, not a cut, and this increase is unlikely to occur before the third quarter of 2027. This approach is in clear contrast to the views of analysts, particularly in the crypto markets, who expect an interest rate cut this year.
JPMorgan's "reverse" scenario
According to the assessment reflected in Reuters, JPMorgan predicts that the Fed will keep the policy interest rate stable in the 3.5–3.75 percent range throughout 2026, followed by a 25 basis point increase in the third quarter of 2027. This forecast of the bank does not align with market pricing for an earlier interest rate cut. In particular, CME Fed funds futures show that investors are positioned with the expectation of two 25 basis point interest rate cuts this year. In the prevailing optimistic scenario in the crypto markets, it is thought that falling interest rates will increase risk appetite and accelerate capital flows into digital assets. In this context, Bitcoin stands out as an instrument more sensitive to interest rate expectations compared to traditional assets. Bitcoin, which is directly linked to fiat currency liquidity, is frequently discussed with the view that it can perform more strongly if borrowing costs decline. FXTM senior market analyst Lukman Otunuga is among those who support this expectation. Otunuga states that although 2025 will be challenging, Bitcoin has the potential to recover in 2026, and that lower interest rates and a decrease in the active supply in the market could be supportive of prices. Many optimistic investors in the crypto market also think that a possible change in the Fed chairmanship could open the door to a more dovish monetary policy. Current Fed Chairman Jerome Powell's term will end in early May. JPMorgan's expectation of tighter monetary policy also coincides with the technical outlook for US 10-year Treasury yields. Chart patterns suggest that the 10-year Treasury yield could rise towards 6% in the coming period. Currently, this yield is around 4.18%. This picture raises the possibility that financial conditions may remain tighter than expected. However, JPMorgan is not entirely ruling out the possibility of an interest rate cut. Bank analysts acknowledge that the Fed may ease rates later this year if there is a significant weakening in the labor market or a faster-than-expected decline in inflation. However, current data shows that this scenario is not strong in the short term. According to JPMorgan, the labor market is expected to tighten again starting in the second quarter, and the disinflation process is expected to proceed quite gradually. The recently released US employment data also supports this stance. The unemployment rate falling to 4.4% in December has led many major banks to reconsider their interest rate cut schedules. Goldman Sachs and Barclays have shifted their expectations for interest rate cuts, previously pointing to March and June, to September and December. This indicates that uncertainty regarding the interest rate path persists and that macroeconomic dynamics closely monitored by crypto markets remain important.
