Danske Research changed its US Federal Reserve forecast to two 25 basis point rate cuts in June and September, instead of March and June. It expects the policy rate to be held at 3.00–3.25% through 2026 and 2027.
The change follows a strong January jobs report, which reduced the case for near-term easing. The forecast still points to rate cuts restarting in summer.
Implications For The Policy Path
Factors cited include slower wage growth, easing housing inflation, and the risk that private consumption could weaken. The June meeting is described as the first under Fed chair Kevin Warsh.
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We must adjust our view, as the expectation for a rate cut in March is now off the table. This is a direct response to the strong January jobs report, which showed a gain of 295,000 jobs, far exceeding the 180,000 we had forecasted. Consequently, the Federal Reserve has room to wait until the summer before beginning its easing cycle.
This delay means that front-end interest rate futures, such as those for March and May, should reprice higher to reflect a more hawkish short-term path. The focus for pricing in any cuts will now shift heavily towards the June and September meetings. Options strategies should be recalibrated to account for this new timeline, with less premium placed on near-term dovish outcomes.
Trading And Hedging Considerations
For the US dollar, a later rate cut provides a pillar of support that we didn’t anticipate just a few weeks ago. The dollar is likely to remain stronger for longer, especially against currencies whose central banks are still expected to ease sooner. This environment could make short-term call options on the dollar index an interesting hedge or speculative position.
Looking back at the equity market’s negative reaction to the aggressive rate hikes throughout 2025, this “higher for longer” stance could cap near-term stock market gains. Traders may consider buying protective put options on major indices as a hedge against any disappointment over the delayed easing. Volatility could pick up as the market digests that stimulus is not as imminent as previously hoped.
Despite this delay, we still see a good case for cuts starting in June based on cooling underlying data. Average hourly earnings growth, for instance, slowed to 3.9% year-over-year in January, down from the 4.5% prints we saw in late 2025. The transition to a new Fed chair in June also introduces a key variable that will guide policy through the second half of the year.
