Fed Rate Trajectory in 2026: BlackRock's Measured Outlook

BlackRock’s latest analysis projects a steady monetary policy adjustment ahead, with the Federal Reserve expected to trim interest rates in a deliberate manner throughout 2026. According to the December 2025 Fed dot plot, policymakers are charting a cautious course as they navigate away from the aggressive rate-hiking cycle that followed the 2022 inflation spike.

The investment giant’s perspective aligns with the Fed’s own signaling framework. Market participants are increasingly factoring in a scenario where the fed funds rate declines from the 3.6% level anticipated for 2025 down to approximately 3.4% by the end of 2026. This modest reduction reflects the central bank’s data-dependent methodology rather than any dramatic policy pivot.

BlackRock strategists note that current economic conditions support this gradual adjustment framework. While growth indicators suggest a slowdown is underway, the economy continues to show resilience without entering recessionary territory. This Goldilocks-like environment—neither overheating nor collapsing—provides the Fed with room for a slow-walk approach to loosening monetary conditions.

The December 2025 Fed dot plot carries particular significance for understanding policymaker intentions. Rather than signaling aggressive easing, the projections convey a commitment to incremental moves calibrated around incoming economic data. Rate cuts, when they arrive, are expected to be measured and deliberate, contrasting sharply with the rapid tightening phase that characterized 2022-2023.