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Traders Bet on Third Fed Cut in 2026 as Inflation Ebbs
Posted
February 13, 2026
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February 13, 2026
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4:05Now PlayingTraders priced in higher odds that the Federal Reserve will cut interest rates more than twice this year, unleashing gains in the Treasury market, after a gauge of US inflation eased. The consumer price index rose less than estimated in January, potentially allaying the concerns of some Fed policymakers that inflation remains too high to cut rates further in response to signs of weakness in the job market. Employment data released this week were stronger than anticipated, prompting traders to abandon wagers on a Fed rate cut before mid-year. At that point, the central bank may be led by former Fed Governor Kevin Warsh, US President Donald Trump’s pick to succeed Jerome Powell and an advocate of cutting rates. Bloomberg TV and Radio International Economics & Policy Correspondent Michael McKee joins Bloomberg Businessweek Daily to discuss. He speaks with Carol Massar and Tim Stenovec. Federal Reserve Bank of Chicago President Austan Goolsbee said Monday there is potential for more interest rate cuts this year, if inflation continues to return towards the central bank’s 2% target.
Warning that services inflation remains elevated, Goolsbee said if price hikes linked to tariffs are a one-off, it could allow policymakers room to move.
“I do think that if this proves to be transitory, and we can show that we’re on path back to 2% inflation, I still think there’s several more rate cuts that can happen in 2026, but we’ve got to see it,” Goolsbee told CNBC in an interview.
Fed officials kept interest rates on hold at their meeting last month following three cuts in the closing months of 2025 to bolster weaker hiring.
“I want some evidence that we’re headed back to 2%, and then I think rates can keep coming down,” Goolsbee said.
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