Friday’s jobs data may have blown past estimates and highlighted the positives in the U.S. economy, but analysts at Macquarie Group think that advisors are still looking at a Fed rate hike early next year.
Interest rates remain firmly in the spotlight under new Fed Chair Kevin Warsh. Nominated by President Donald Trump, Warsh took office as Fed Chair on May 22, succeeding Jerome Powell, who had resisted repeated calls from Trump to cut rates.
While Warsh’s Federal Reserve will be closely scrutinized over the coming weeks, Macquarie Group thinks that a rate hike, not cut, is looming next year.
“Our baseline FOMC view is unchanged on the release [of the latest jobs data],” said David Doyle, head of economics at Macquarie, in a note. “As we have been highlighting for some time, we see the next move as a hike with our baseline timing being in 1Q27.”
“Risks to this have become skewed to an earlier hiking with markets now discounting a hike in 4Q26,” he added. “FOMC rhetoric is likely to continue to shift away from a cutting bias and towards a hiking bias in coming weeks.”
Analysts at Charles Schwab recently said that Warsh is unlikely to deliver rate cuts anytime soon, citing inflation levels that remain elevated. The CME’s FedWatch tool also shows little chance for a 2026 rate cut. The possibility of a rate hike, however, emerges later this year and in 2027, according to the tool.
The next meeting of the Federal Open Market Committee, which will be the first led by Warsh, is on June 16 and 17.
The Fed made its last rate cut in December 2025 and has kept its policy rate steady at 3.5% to 3.75% since then. The CME’s FedWatch tool puts the likelihood of rates staying unchanged at 98.2%, and the possibility of a cut to between 3.25% and 3.5% at just 1.8%.
Friday’s jobs report marked something of shift in market sentiment, according to Thierry Wizman, Global FX & Rates Strategist at Macquarie Group. “Up until Friday, traders were willing to enjoy the promise of strong growth without the prospect of higher real interest rates,” he said. “But after Friday, the high growth narrative, which drove stocks higher especially, seems to have given way to a rates-driven narrative.”
“In that new narrative, 'good' economic news may drive real interest rates higher, and be an impediment to high stock market multiples,” Wizman added.
The S&P 500 index is up 0.7% Monday, after ending Friday’s session down 2.6%, while the Dow Jones Industrial Average is up 0.05%, after closing down 1.4% on Friday.
Siddharth Jawahar was sentenced 11 years in prison and $31M in restitution for running Swiftarc Capital fraud scheme
Wall Street banks expand wealth services as ultra-high-net-worth client demands extend further above and beyond investment management.
The acquisition of $2 billion Gilbert & Cook extends a buying spree for the ultra-high-net-worth firm that has already touched six states this year.
After years of encouraging sacrifice and delayed gratification, advisors have to do the next emotional lift: helping clients let go of a potentially harmful scarcity mindset.
A new JPMorganChase Institute report reveals how deeply stock market wealth now drives everyday American spending, especially for retirees.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
