Fed Interest Rate Cut 2026 CBO Forecast: The End of High Rates?

Your borrowing costs might finally drop. The Congressional Budget Office (CBO) expects the Fed to start trimming interest rates slightly in 2026.

Decoding the 2026 Fed Interest Rate Cut Forecast

According to Reuters, the CBO predicts that the Federal Reserve will implement modest rate cuts this year. It's a sign that the central bank is gaining confidence as inflation cools down and economic growth stabilizes.

The CBO's report suggests a cautious approach. Instead of aggressive slashing, the Fed will likely monitor labor market resilience and consumer spending closely before making each move. Markets are already reacting to this potential pivot, looking for relief after a long period of restrictive policy.

Inflation Trends and the Soft Landing Scenario

The forecast is rooted in data showing inflation heading toward the Fed's 2% target. The CBO believes the U.S. economy is on track for a 'soft landing'—curbing inflation without triggering a massive recession. However, they've warned that geopolitical tensions could still disrupt this fragile balance.