Fed rate hike prophecy and market interest rate cut dreams align? JPMorgan's 2026-2027 policy forecast fully explained

The expectations gap between the cryptocurrency market and traditional investment banks regarding the Federal Reserve’s future policy is widening. While most traders and analysts are eagerly anticipating rate cuts as a bullish signal, JPMorgan has poured cold water—its judgment aligns with the mainstream market expectation, or even takes a completely opposite stance, presenting two divergent paths.

JPMorgan Throws Out “Rate Hike Shock,” Contrasting with Street Consensus

According to a report by Reuters, JPMorgan has made bold predictions about the Fed’s policy: the U.S. Federal Reserve will keep interest rates steady in the 3.5% to 3.75% range throughout 2026, then raise rates by 1 basis point (25 basis points) in Q3 2027. This forecast implies that borrowing costs will not decrease in the next year and a half, and may even rise.

In stark contrast, the CME FedWatch Tool shows traders widely positioning for rate cuts—markets generally bet on at least two rate cuts this year, each by 1 basis point. Many crypto analysts also hold this view, believing that once rates decline, the reduction in borrowing costs will reignite risk appetite in the economy and financial markets, which is undoubtedly a bullish signal for Bitcoin.

Can Rate Cut Expectations Materialize? Key Data in the Market’s Bull-Bear Battle

The latest U.S. unemployment rate performance has become a key indicator for judging Fed policy. According to December last year’s employment data, the U.S. unemployment rate unexpectedly fell to 4.4%, reflecting the labor market’s continued resilience. This solid fundamental support has prompted investment banks like Goldman Sachs and Barclays to adjust their rate cut timelines, delaying their previous forecasts of March and June to September and December.

FXTM senior market analyst Lukman Otunuga commented: “Although 2025 will be challenging, with liquidity tightening and the possibility of rate cuts, Bitcoin is expected to perform strongly in the first half of 2026.” This optimistic sentiment is spreading in the crypto community, with many investors pinning hopes on the new Fed Chair, expecting them to be more dovish than the previous Chair Powell.

Technical Signals from the 10-Year U.S. Treasury Yield Align with Fed Policy

JPMorgan’s rate hike forecast coincides with an important market signal—the technical pattern of the 10-year U.S. Treasury yield. As a benchmark for global asset pricing, this indicator currently hovers around 4.18%, but technical analysis suggests it could challenge the 6% high within the next year. If U.S. Treasury yields truly surge to this level, it will exert considerable pressure on high-valued assets and various riskier investments.

This warning signal warrants attention because a high-yield environment will push up the risk-free rate, thereby weakening investors’ appetite for high-risk assets like cryptocurrencies. In other words, whether rate cuts will happen depends critically on the trajectory of the 10-year Treasury yield.

Resilient Labor Market Delays Investment Banks’ Rate Cut Plans

Although JPMorgan’s analysts have forecasted rate hikes, they also admit there is room for reconsideration. If the labor market shows clear signs of weakening or inflation drops significantly, the Fed could change its stance and shift toward rate cuts later this year. However, current employment data dispel such optimism—stable or even declining unemployment rates suggest the Fed will continue to exercise patience in policy adjustments.

Because the economic fundamentals remain solid, many investment banks have been forced to revise their forecasts. This chain reaction has already caused ripples in the market, with investors expecting rate cuts and liquidity easing facing stark realities. Whether the market can find a balance between strong economic fundamentals and rate cut expectations will be the biggest test of traders’ patience in 2026.