The direction of Fed policy continues to roil global financial markets. Many officials have spoken intensively recently, and divisions over the pace and magnitude of rate cuts have further highlighted. Neel Kashkari, 2026 FOMC voter and President of the Federal Reserve Bank of Minneapolis, stated that the current U.S. interest rate level may be close to the “neutral interest rate”, and future policy adjustments will depend entirely on the latest economic data. Anna Paulson, President of the Federal Reserve Bank of Philadelphia, explicitly hinted that moderate small rate cuts may be implemented in the second half of 2026, but only if inflation eases, the labor market stabilizes, and the economic growth rate reaches around 2%.

This statement is quite different from market expectations. Currently, the market calculates through federal funds rate futures pricing that it expects at least a 2-percentage-point rate cut within the year, while the median forecast of Fed officials for a 2026 rate cut is only 0.25 percentage points. Mark Zandi, chief economist at Moody’s Analytics, gave a more aggressive forecast, believing that factors such as a weak labor market and uncertain inflation prospects may force the Fed to implement three 25-basis-point rate cuts before the middle of the year, a judgment that is also far higher than the mainstream official expectations.

Former Fed Chair Janet Yellen has previously warned that the massive debt scale may force the central bank to keep interest rates low to reduce debt servicing costs, rather than focusing on curbing inflation. According to the U.S. Congressional Budget Office, the U.S. deficit will reach $1.9 trillion this year, and the debt-to-GDP ratio will rise to 100% and continue to climb, which undoubtedly adds more constraints to the Fed’s policy adjustments.