Why this strategist still thinks there will be 4 Fed rate cuts in 2026

Federal Reserve Officials' Stance - Federal Reserve officials Beth Hammock and Lorie Logan indicate a preference to hold interest rates steady, citing concerns about persistent inflation and the current appropriateness of monetary policy [1][2] - Hammock believes inflation remains too high, forecasting it could persist around 3% this year, and emphasizes the need for decisive evidence of declining prices before considering rate cuts [2][3] - Logan expresses uncertainty about the current restrictiveness of policy following last year's rate cuts, suggesting that the impact on inflation and the job market will be clearer in the coming months [2][3] Labor Market and Inflation Insights - Recent data points, including the employment cost index, suggest a cooling labor market, with wage growth at its lowest rate since 2021, indicating a lack of demand for labor [1] - The labor market's cooling is not attributed to supply issues but rather to decreased demand, which is reflected in wage disinflation [1] - Concerns are raised about the potential for inflation to reignite if the Federal Reserve cuts rates prematurely, especially with GDP growth estimates around 2.5% for the fourth quarter and 2.3% for the first quarter [1] Consumer Spending and Retail Sales - Retail sales data showed a surprising negative print for December, indicating consumer spending is under pressure, particularly outside the top income bracket [2] - The negative revisions to previous months' retail sales figures highlight ongoing challenges for the US consumer, suggesting that wage growth is insufficient to support consumption [2]