Core Viewpoint - The macroeconomic outlook for 2026 indicates that the Federal Reserve's policy choices will be increasingly path-dependent due to overlapping influences of inflation, economic growth pressures, and the political cycle [1] Group 1: Federal Reserve Policy - The upcoming change in leadership at the Federal Reserve, with Jerome Powell's term ending in May 2026, is expected to significantly impact policy communication and market expectations [1] - Monetary policy is evolving from a passive response to economic conditions to a more integrated approach that considers fiscal pressures, debt costs, and administrative policy preferences [1] - The certainty of a rate cut path is increasing, driven by the sensitivity of fiscal conditions to interest rates, which necessitates balancing fiscal sustainability with debt issuance pressures [1] Group 2: Economic Conditions - Short-term inflation disturbances caused by tariffs have not altered the overall downward trend of inflation, while the labor market is experiencing wage stickiness that is gradually easing due to factors like AI replacement and immigration policy adjustments [1] - This easing of wage stickiness provides additional space for a more accommodative interest rate environment [1] Group 3: Interest Rate Projections - The macro team projects that the Federal Reserve will implement approximately four rate cuts by the end of 2026, bringing the policy rate to a range of 2.75% to 3% [2] - The reduction in interest rates is expected to alleviate debt financing cost pressures and create a mild recovery space for interest-sensitive sectors such as real estate, serving as a critical support mechanism amid economic downturn pressures [2]