Q1 rate cuts

Extracted Attributes

• Key Skeptic

  Larry Summers (cautious outlook on early 2024 cuts)

• Economic Theory

  Bumpy Landing (predicted by David Sacks)

• Geopolitical Risks

  Red Sea shipping disruptions and Middle East conflict expansion

• Market Sentiment (2026)

  Expectation of two quarter-point rate cuts to a range of 3% to 3.25%

• Primary Economic Driver

  Persistent inflation and labor market stability

Timeline

• All-In Podcast discusses doubts regarding Q1 rate cuts due to US strikes in Yemen and persistent inflation. (Source: All-In Podcast E161)

  2024-01-12

• Economist Mark Zandi predicts the Federal Reserve will surprise markets with three rate cuts in the first half of 2026. (Source: CNBC)

  2025-12-31

• The IRS announces that interest rates for overpayments and underpayments will remain at 7% for the first quarter of 2026. (Source: IRS.gov)

  2026-01-01

• Philadelphia Fed President Anna Paulson signals that further rate cuts could be delayed while officials assess economic performance. (Source: Reuters)

  2026-01-03

• Scheduled start of the FOMC meeting where market pricing indicates a low probability of a rate cut. (Source: CNBC)

  2026-01-27

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act, Pub. L. 115–97 (text) (PDF), is a United States federal law that amended the Internal Revenue Code of 1986, and also known as the Trump Tax Cuts, but officially the law has no short title, with that being removed during the Senate amendment process. The New York Times described the TCJA as "the most sweeping tax overhaul in decades". Studies show the TCJA increased the federal debt, as well as after-tax incomes disproportionately for the most affluent. It led to an estimated 11% increase in corporate investment, but its effects on economic growth and median wages were smaller than expected and modest at best. Major elements of the changes include reducing tax rates for corporations and individuals, increasing the standard deduction and family tax credits, eliminating personal exemptions and making it less beneficial to itemize deductions, limiting deductions for state and local income taxes and property taxes, further limiting the mortgage interest deduction, reducing the alternative minimum tax for individuals and eliminating it for corporations, doubling the estate tax exemption, and reducing the penalty for violating the individual mandate of the Affordable Care Act (ACA) to $0. Most of the changes introduced by the bill went into effect on January 1, 2018, and did not affect 2017 taxes. Many tax cut provisions contained in the TCJA, notably including individual income tax cuts, such as the changes to the standard deduction in §63 of the IRC, were scheduled to expire in 2025 while many of the business tax cuts were set to expire in 2028. However, in 2025, Congress passed the One Big Beautiful Bill Act, which extends most provisions of the TCJA beyond their original expiration dates. Extending the cuts have caused economists across the political spectrum to worry it could boost inflationary pressures and worsen America's fiscal trajectory. The Congressional Budget Office estimated that extending the expiring provisions would add $4.6 trillion in deficits over 10 years.

Web Search Results

• Divisions at the Fed that defined 2025 are expected to carry into 2026

  But Powell is still chair until May, and Stith says as a result, there won’t be many rate cuts in the first part of the year. He thinks we’ll get one cut between January and May. “I think we are going to get a couple over the course of the full year once we get a new chairperson,” said Stith. “It's going to be a [central bank] more tied to the administration ... than we've seen in a long time. So, I think rate cuts are coming.” [...] As summer wound down, job market data showed bigger cracks than thought, prompting Powell to lay the groundwork in August for a rate cut in September. That would mark the first of three rate cuts through the fall, mirroring 2024. [...] By December, fissures within the central bank were blatant. Though the Fed ended up cutting rates this month for the third time, two voting members — Chicago Fed president Austan Goolsbee and Kansas City Fed president Jeff Schmid — dissented because both preferred holding rates steady on inflation concerns. On the other side, Miran dissented, preferring to cut by a larger amount of 50 basis points. Six other non-voting members also would have preferred not to cut this month.

• Fed Interest Rate Forecast for 2026: How Many Cuts To Expect

  As of late December, CME FedWatch shows that financial markets expect the Fed to make just two quarter-point rate cuts in 2026, which would bring the policy rate to a range of 3% to 3.25%. Bettors on the prediction market Polymarket are a bit more optimistic, giving a roughly equal probability of two cuts and three cuts in 2026. [...] Two subsequent cuts have brought the Fed's benchmark interest rate to a current range of 3.5% to 3.75%, which is down 75 basis points from a year ago. The Fed uses lower interest rates to stimulate the labor market, and higher rates to fight inflation, in line with the central bank's dual mandate of price stability and maximum employment. [...] Chip Somodevilla/Getty Images The new year will bring big changes at the Federal Reserve, with major implications for borrowing costs, the housing market, and the overall economy. In addition to major upcoming personnel changes, Fed policymakers have signaled that further rate cuts are unlikely until the spring. That sets up a renewed showdown with President Donald Trump, who has made clear his desire for dramatically lower interest rates.

• Fed's Paulson signals another rate cut could take a while By Reuters

  | Name | Last | Chg. % | Vol. | --- --- | | MU | 315.42 | +10.51% | 42.60M | | WDC | 187.70 | +8.96% | 6.81M | | ASML | 1,163.78 | +8.78% | 2.70M | | LRCX | 185.06 | +8.11% | 11.96M | | TER | 207.56 | +7.23% | 3.22M | | INTC | 39.38 | +6.72% | 95.40M | | SMCI | 30.96 | +5.77% | 30.68M | [...] | Name | Last | Chg. % | Vol. | --- --- | | NVDA | 188.85 | +1.26% | 148.24M | | TSLA | 438.07 | -2.59% | 85.54M | | PLTR | 167.86 | -5.56% | 60.63M | | AMZN | 226.50 | -1.87% | 51.46M | | MU | 315.42 | +10.51% | 42.60M | | AAPL | 271.01 | -0.31% | 37.84M | | MSFT | 472.94 | -2.21% | 25.57M | [...] Economy Published 01/03/2026, 02:31 PM Updated 01/03/2026, 02:36 PM Fed’s Paulson signals another rate cut could take a while View all comments (1)1 By Michael S. Derby Jan 3 (Reuters) - Federal Reserve Bank of Philadelphia President Anna Paulson said on Saturday that further central bank rate cuts could be some way off while officials take stock of the economy’s performance after an active campaign of easing last year.

• Interest rates remain the same for the first quarter of 2026

  WASHINGTON — The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2026. For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily. The rates are as follows:

• Economist Mark Zandi sees the Fed surprising with three rate cuts in ...

  Though markets and Fed officials themselves see only modest easing in the year ahead, Zandi expects the central bank to enact three cuts of a quarter percentage point each before mid-year. [...] The FOMC meets again on Jan. 27-28. Market pricing is putting just a 13.8% probability of a cut at that meeting, according to the CME. [...] Market pricing currently points to two cuts, the first not coming until at leas April and the second more likely in the back half of the year, probably around September, according to CME futures data as expressed through its FedWatch gauge. Fed policymakers have an even more cautious outlook.