The Federal Reserve remains deeply divided on its policy path forward, according to Societe Generale analyst Jan Groen. A dominant “keep-on-hold” faction within the Fed is adopting a wait-and-see approach, specifically targeting core PCE inflation data expected in the second half of 2026 before considering any rate increases. This internal split reveals uncertainty among policymakers about the inflation trajectory and appropriate monetary response timing.
The division suggests markets should prepare for an extended pause in Fed tightening, with any potential hikes unlikely before late 2026 at the earliest. Traders and brokers should note this delays expectations for higher borrowing costs and could influence positioning in rate-sensitive assets, particularly bonds and currencies. The emphasis on core PCE data as the key decision metric indicates the Fed is prioritizing inflation measurement over preemptive action.
FXnCO Insight
Position for a prolonged dovish hold through mid-2026, focusing on core PCE releases as the critical catalyst for any hawkish pivot in Fed policy.
Source: FXStreet