It's Hard to Cut Interest Rates Again This Year, Interest Rate Hikes Will Be Delayed If the Interest Rate Gap Widens, the Fed Has Entered a Policy Pause Period

BlockBeats News, May 8th. In Federal Reserve interest rate decisions, a larger divergence of views often tends to keep the rate unchanged for a longer period. In the recent April 2026 FOMC meeting, the Fed set a record for the largest divergence since 1992 with an 8-4 vote to maintain the federal funds rate target range at 3.5%-3.75%, unchanged for the third consecutive time. While one official supported an immediate 25bp rate cut, three others agreed to keep the rate steady but retained a dovish stance in their dissents. There is a profound internal division within the Fed on inflation risks, the labor market, and the neutral interest rate level.

As the differences in Fed members' economic outlooks widen, the difficulty of reaching a consensus on rate adjustments increases simultaneously, leading to "inertia" maintaining the status quo. Policies often stay at current levels for a longer period to wait for more data to resolve uncertainty. With the federal funds rate nearing the neutral range, this divergence directly points to a higher probability of the rate remaining unchanged for a longer period, rather than a quick shift. The market is expected to face a prolonged waiting period.

According to CME FedWatch data, the year-end 2026 Fed rate outlook is as follows: the probability of no further rate cuts throughout the year is 72.6%, the probability of a cumulative 25 basis point rate cut for the year is 8.5%, the probability of a cumulative 50 basis point rate cut is 0.3%, the probability of a cumulative 25 basis point rate hike is 17.6%, and the probability of a cumulative 50 basis point rate hike is 1%.

Furthermore, the probability of a 25 basis point rate cut at the Fed's next meeting (June) is 4.1%.