HSBC projects three Fed rate cuts through March 2026

According to a recent forecast by HSBC, the US Federal Reserve (Fed) will lower rates by 25 basis points three times through March 2026. Analysts project cuts in September and December this year, followed by another one in March next year. 

HSBC believes US inflation will stay above the central bank’s 2% target through the forecast period. The bank expects Fed rates between 3.50% and 3.75% by the end of next year, which implies a cumulative reduction by 75 basis points.

That said, a weak US labor market could spark broader monetary easing, while persistently high inflation may result in fewer cuts, HSBC adds. 

Fed Chairman Jerome Powell claimed during his press conference that he is taking a patient approach to monetary policy while awaiting clearer economic data in the coming months.

As the Fed has paused its rate cuts, foreign exchange markets are now more focused on the global geopolitical situation, as well as US import tariffs and budget deficit. These factors currently suggest further weakening of the dollar, HSBC reports.