IMF: The Federal Reserve has limited room to cut rates in 2026 and is expected to have only one rate-cut opportunity during the year

Gate News, April 2, the International Monetary Fund (IMF) released its annual assessment report on the U.S. economy, noting that although U.S. inflation is expected to ease to the Federal Reserve’s 2% target in the first half of 2026, policymakers this year have little room to cut rates. IMF staff project that by the end of 2026 there may be only one opportunity for a rate cut. The report says: “Overall, staff believe there is limited scope for policy rate reductions over the next year. A more substantial easing would need to be predicated on a significant deterioration in labor market prospects and no increase in inflation pressures. The recent rise in oil prices and commodity prices has pushed inflation expectations upward.” In a separate statement, the IMF’s Executive Director further added that, given that the Federal Reserve’s current policy is close to neutral, “there is limited room to cut rates in 2026—especially considering the upward pressure from energy prices, the pass-through effects of core inflation, and the risks of higher global commodity prices—which could further delay the achievement of the inflation target.”