Recent economic data point to moderating inflation and a continued rebalancing in labor market conditions. Although price pressures remain modestly above the Federal Reserve’s longer-run target, the unemployment rate has declined to 4.3%. As the data flow stabilizes, the Chandler team expects further yield curve steepening as the Federal Reserve gradually guides the policy rate toward a more neutral range. One additional 25-basis-point rate cut may occur in the first half of 2026, while U.S. trade and fiscal policy remain key sources of elevated market uncertainty.
The Federal Reserve’s January Federal Open Market Committee meeting concluded with policymakers maintaining the target range at 3.50%-3.75%, following three consecutive 25-basis-point cuts at the end of 2025. However, officials remained divided on the policy outlook, as Governors Christopher Waller and Stephen Miran dissented in favor of an additional rate reduction. Meanwhile, the future policy regime began to take shape with President Trump’s announcement of Kevin Warsh as his nominee for the next Federal Reserve Chair.