U.S. Federal Reserve likely to tighten policy and raise rates by end‑2026

Qatar National Bank (QNB) predicts that the U.S. Federal Reserve will adopt a more aggressive monetary stance amid persistent inflation pressures. The bank’s report says market participants now see a 25‑basis‑point rate increase by the end of 2026, which could lift the federal funds rate to around 4%. This outlook follows weaker U.S. job‑creation data – only 57,000 non‑farm jobs added in the latest month, far below forecasts – and a recent slowdown in oil‑price‑driven inflation.

The appointment of Kevin Warsh as Fed chair has reinforced the focus on price stability, with Warsh publicly stressing the need to curb inflation over supporting labor‑market concerns. Consequently, investor expectations for a September rate hike have slipped to about 54%, down from 66% a week earlier, and mortgage‑rate spreads have narrowed to their lowest level since mid‑May. Despite these easing signals, bond yields remain elevated, reflecting lingering uncertainty about the policy path.