Federal Reserve’s 2026 Rate Decisions: Mixed Signals for Stocks, Bonds, and Crypto Investments

By Perplexity News Staff | January 29, 2026

Washington, D.C. – The Federal Reserve’s recent decision to hold interest rates steady at 3.5%-3.75% has sent ripples through financial markets, leaving investors in stocks, bonds, cryptocurrencies, and other assets grappling with uncertainty as 2026 unfolds.[4][5]

In its January 28 meeting, the Fed paused after three rate cuts in 2025 that lowered the federal funds rate by 0.75 percentage points in the fall, bringing the total reduction since September 2024 to 1.75 percentage points.[1][5] This marks the fifth consecutive meeting with dissenting votes, highlighting internal divisions that could erode the central bank’s credibility on future policy.[4]

Divergent Forecasts Shape Market Expectations

Analysts offer conflicting predictions for the Fed’s path ahead. Bankrate forecasts three more cuts totaling 0.75 percentage points in 2026, potentially bringing rates near pre-pandemic peaks, though political pressures and fiscal policies like the One Big Beautiful Bill Act of 2025 – injecting $100 billion via tax cuts – may fuel inflation and delay easing.[1]

iShares anticipates a gradual decline to around 3% by year-end, emphasizing data on inflation and labor markets, with added uncertainty from Fed Chair Jerome Powell’s term expiring in May.[2] In contrast, J.P. Morgan Global Research expects no further cuts through 2026, citing a stabilizing unemployment rate at 4.4% and gradual disinflation, potentially followed by a hike in 2027.[3]

Morningstar and American Century align more closely with cautious optimism, predicting possible additional cuts of 0.5 to 0.75 points if economic slack emerges, but solid growth from AI-driven capital spending and tax refunds tempers expectations.[4][5]

2026 Fed Rate Cut Forecasts from Key Sources

Source	Expected Cuts	End-2026 Rate Range
Bankrate[1]	3 cuts (0.75% total)	Near pre-pandemic levels
iShares[2]	Gradual to ~3%	~3%
J.P. Morgan[3]	None (hold)	3.5%-3.75%
Morningstar[5]	0.5% possible	Steady or lower

Impact on Stocks: Growth vs. Inflation Tug-of-War

Higher rates generally pressure stock valuations by increasing borrowing costs and making bonds more attractive, but the Fed’s 2025 easing has supported equity rallies amid AI-fueled growth.[1][4] Software and AI investments drove half of U.S. GDP growth in early 2025, up from 10% in 2019, signaling resilience.[1]

However, unemployment edging to 4.5% by year-end and tariff-related inflation at 2.8% core rate could prompt caution.[1][4] A pro-growth regulatory environment and consumer boosts from tax refunds may sustain stock gains, particularly in tech, if cuts materialize.[4]

Bonds Benefit from Yield Curve Opportunities

Bond investors stand to gain from expected rate paths. iShares recommends the “belly” of the yield curve (intermediate maturities) for income, using laddering to manage duration risk amid potential declines to 3%.[2] Steady rates favor shorter-term Treasuries, while any cuts could lift longer-duration bonds as yields fall.[3]

With inflation risks from fiscal stimulus, core bonds may underperform, pushing investors toward higher-yield alternatives.[1][2]

Crypto and Alternative Assets in Flux

Cryptocurrencies, sensitive to liquidity, thrive on rate cuts that encourage risk-taking. The 1.75% easing since 2024 has bolstered crypto amid Bitcoin’s correlation with equities.[5] J.P. Morgan’s hold forecast suggests limited upside, but Bankrate’s cuts could spark rallies if inflation cools.[1][3]

Political shifts, including a potential new Fed chair like Kevin Hassett advocating lower rates, add volatility. Markets await FOMC cohesion as labor tightens and AI spending persists.[3]

Broader Economic Tailwinds and Risks

• Pro-Growth Factors: AI capital boom, tax refunds ($100B injection), regulatory easing, prior Fed cuts loosening conditions.[1][4]
• Inflation Pressures: Tariffs, fiscal stimulus; core at 2.8%, demand-driven risks moderated.[1][4]
• Labor Market: Unemployment stable at 4.4%-4.5%; no rush to cut without slack.[3][5]

Powell stressed a meeting-by-meeting approach, with upside inflation risks tempering easing despite solid GDP outlook upgraded to ‘solid.'[4][5]

Investor Strategies Amid Uncertainty

Diversification is key: ladder bonds for income, favor AI/tech stocks for growth, monitor crypto for liquidity signals. Leadership changes post-May could pivot policy, but data – inflation under 2%, labor stability – reigns supreme.[2][3]

As markets digest the pause, the Fed’s balancing act between growth and price stability will dictate asset performance through 2026.