Federal Reserve expected to hold rates steady this year, BMO economist says, with cuts seen in 2027

The Federal Reserve isn’t touching that dial anytime soon. Jennifer Lee, Senior Economist at BMO Capital Markets, expects the central bank to keep interest rates exactly where they are for the rest of 2026, with the first cuts not arriving until late 2027. For anyone hoping cheaper borrowing costs were right around the corner, the forecast amounts to a polite but firm “not yet.” And given Lee’s roughly three decades at BMO watching the Fed’s every move, her read on the situation carries weight. A new chair, the same patience The projection lands at an interesting moment for the Fed. Kevin Warsh, nominated by President Trump, was confirmed and sworn in as Fed Chair on May 22, 2026. New leadership often raises questions about whether the central bank’s direction might shift. BMO’s outlook envisions yields averaging around 4.25% in a post-cut environment, whenever those cuts eventually materialize. That number implies the firm expects any easing to be gradual rather than aggressive, a slow descent rather than a cliff dive. Geopolitics muddying the waters Lee flagged global developments as a complicating factor, specifically pointing to the conflict in Iran as a potential influence on ...