JPMorgan has predicted that the U.S. Federal Reserve's next interest-rate move will likely be an increase, not expected before the third quarter of 2027. This outlook contradicts some crypto analysts who anticipate lower borrowing costs sooner.
On Friday, the world's largest bank by market capitalization stated it expects the Fed to maintain rates with a 3.5%-3.75% target this year, followed by a 25 basis-point rise in Q3 2027, according to Reuters.
This prediction stands in sharp contrast to pricing in CME's fed fund futures, where traders are positioned for two 25 basis-point rate cuts this year. Many crypto analysts also say they expect borrowing costs to decline, which could encourage greater risk-taking across the economy and financial markets. Bitcoin, often viewed as a pure play on fiat liquidity, is more sensitive to interest-rate expectations than traditional assets.
"Despite a difficult 2025, bitcoin may stage a comeback in 2026," said Lukman Otunuga, senior market analyst at FXTM, in an email to CoinDesk. "Lower interest rates and a thinning active supply could support prices."
Most crypto bulls expect the next Fed Chairman to be more dovish than the incumbent, Jerome Powell, whose term is set to end in early May.
JPMorgan's forecast of higher rates aligns with bullish chart patterns in the 10-year Treasury yield discussed by CoinDesk in November. The pattern suggests the benchmark bond yield could rise toward 6% in the coming year or so, from its current level of about 4.18%.
However, the bank maintained that rate cuts could be reconsidered if the labor market weakens or inflation falls.
"If the labor market weakens again in the coming months, or if inflation falls materially, the Fed could still ease later this year," JPMorgan analysts said. "However, we expect the labor market to tighten by the second quarter and the disinflation process to be quite gradual."
Following Friday's U.S. employment data, which showed the jobless rate dipped to 4.4% in December, several other investment banks have reassessed their rate-cut forecasts.
Goldman Sachs and Barclays now foresee rate reductions in September and December, after a lowering in June, compared to their previous projections of cuts in March and June.