Federal Reserve poised to hold rates steady through 2026 as inflation concerns take priority. The US central bank is expected to drop its easing bias and shift toward a tightening stance, according to Elara Securities research. Inflation risks now decisively outweigh labour market concerns, prompting the Fed to abandon earlier forecasts of three 75 basis point rate cuts this year. Core PCE inflation is revised higher to 2.9% by year-end, driven by tariffs, energy prices, and food costs. The Fed's 2% inflation target appears unachievable in the near term. Geopolitical tensions from the US-Iran conflict pose additional upside risks to energy prices. There is a 20% probability of a 25 basis point rate hike in December if the Strait of Hormuz closure persists and energy prices spike further.
