Rabobank’s Senior US Strategist Philip Marey expects the FOMC to deliver three 25 bps rate cuts in 2026. He now expects the easing cycle to start in June rather than March.
Stronger US labour market data are said to have reduced the need for early cuts. Softer CPI inflation is seen as supporting cuts later in 2026.
Rabobank Rate Cut Path
Rabobank expects cuts in June and September, and adds a third cut in October. It notes that September and December meetings include an update of the Summary of Economic Projections.
The federal funds rate is currently 3.50–3.75%, and Rabobank projects a total reduction of 75 bps in 2026. The rate is projected to end slightly below neutral.
The article states that a new Fed Chair may press for more than one cut. It also says the data are not expected to prompt Jerome Powell into further cuts during his remaining months as Chair.
Given the strength of the labor market, we should now assume that the Federal Reserve will not begin cutting interest rates in March. The January jobs report showed the economy added a robust 295,000 jobs, keeping the unemployment rate at a low 3.6%, which removes any urgency for the Fed to act immediately. This means any short-term derivative positions betting on an imminent cut need to be unwound.
Trading Implications For 2026
The easing inflation picture, however, solidifies the case for cuts later this year. With the latest CPI report showing headline inflation cooled to 2.3% year-over-year, the path is clear for future easing once the Fed is comfortable with labor market stability. The derivatives market is already reflecting this, with CME FedWatch Tool probabilities for a March cut falling below 15% while the odds of a cut by June have climbed to over 70%.
For the coming weeks, this suggests a strategy of selling near-term volatility and buying it further out. Options on interest rate futures expiring in March and April have become less attractive, while positioning for movement around the June and September FOMC meetings seems more prudent. We are looking at strategies like calendar spreads on SOFR options to capitalize on this shift in timing.
We must also consider the transition in Fed leadership, as Chairman Powell’s term is expected to end in May. A new Chair will likely want to establish their own policy direction, which supports the idea of multiple cuts in the second half of 2026. This reinforces the view that the easing cycle is delayed, not derailed.
Looking back at how the markets behaved in late 2025, we saw significant rallies when the prospect of rate cuts first emerged. While that initial excitement has been tempered by strong economic data, the underlying expectation for lower rates remains. The key trade now is not about *if* the Fed will cut, but precisely *when* the cycle begins this summer.
