1
Fed Holds Through Q1, Cuts Resume in June
Likely
Discussed by: Goldman Sachs, Morningstar, CME FedWatch (consensus view)
The Fed keeps rates at 3.5-3.75% through the first half of 2026 as it monitors tariff pass-through and shelter inflation. With PCE expected to ease to 2.4% by year-end and a new chair in place after May, the FOMC delivers one or two 25bp cuts starting in June, ending the year at 3.0-3.25%. This path threads the needle between dovish and hawkish factions.
2
Tariff Spike Forces Fed to Pause All Year
Possible
Discussed by: JPMorgan, Tax Foundation, inflation hawks
Businesses pass through more tariff costs to consumers as 2025 inventories deplete, pushing headline inflation back above 3% by mid-year. The Fed holds rates steady through 2026, or even considers tightening if inflation expectations de-anchor. The 200% pharmaceutical tariffs floated by the administration add further upward pressure. The dot plot's single-cut projection proves optimistic.
3
New Fed Chair Accelerates Cuts
Possible
Discussed by: Stephen Miran, Mark Zandi (Moody's), administration officials
Trump appoints a Fed chair committed to rapid rate reduction. The new chair, taking office in May, pushes for aggressive cuts—potentially 100-150 basis points in 2026—arguing that inflation is close enough to target and that high rates are constraining growth unnecessarily. Markets rally on cheaper credit but long-term inflation expectations drift higher.
4
Soft Landing Achieved; Rates Settle at Neutral
Possible
Discussed by: Former Fed Vice Chair Alan Blinder, optimists citing 1995 parallel
Inflation gradually eases to 2.0-2.2% by late 2026 as shelter costs finally moderate and tariff effects prove transitory. The Fed delivers two 25bp cuts, landing at 3.0-3.25%—its estimated neutral rate. The economy avoids recession while inflation returns to target, echoing Greenspan's celebrated 1995 soft landing.
5
DOJ Probe Derails Fed Succession
Possible
Discussed by: Senator Thom Tillis, constitutional law analysts, Fed independence advocates
Republican opposition to the Powell investigation hardens, with Banking Committee members refusing to confirm any Fed chair nominee until the DOJ probe ends. Powell's term expires in May with no successor confirmed, forcing the FOMC to elect an interim chair from sitting governors—likely triggering a constitutional crisis over whether Trump can remove Powell from his board seat (which runs until 2028). Markets react to the uncertainty with volatility.
6
Tariff Pass-Through Spike Forces March Hike
Unlikely
Discussed by: JPMorgan inflation analysts, tariff policy researchers
Businesses that absorbed 80% of tariff costs in 2025 flip to passing through 80% in Q1 2026 as inventory buffers deplete. Headline inflation jumps to 3.5% by March. A hawkish Fed chair nominee, facing Senate confirmation, signals willingness to raise rates to prove inflation-fighting credibility. The FOMC delivers a surprise 25bp hike at the March meeting, reversing nine months of cuts.
7
Warsh Raises Rates to Contain Iran-Driven Inflation
Possible
Resolves by End of 2026
Discussed by: NBC News and CNBC coverage of Warsh's August signals
If energy-driven inflation keeps running above 4%, Warsh raises rates for the first time this cycle, reversing the 2024-25 cuts. August core PCE easing to 3.0% argues for patience instead, giving him cover to hold through the end of the year.
8
Fed Pauses in October, Resumes Hikes by December
Likely
Resolves by Dec 9, 2026
Discussed by: CME FedWatch, Kalshi, Vanguard senior economist Adam Schickling
Weak September hiring and cooler PCE inflation give the FOMC cover to hold at the October 27-28 meeting, as Vice Chair Jefferson and NY Fed President Williams have argued. But with core inflation near 3% and oil prices elevated from the Iran conflict, traders still price better than 75% odds of a December hike, and Kashkari projects more increases into 2027.
