Traders Bet on Rate Cut, But Hike Could Be Looming

Fed officials divided on monetary policy path as inflation remains a concern

Published on Feb. 23, 2026

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Most U.S. Federal Reserve officials agreed to hold interest rates at its January meeting, but were divided on the path forward, with some prioritizing supporting the labor market over controlling inflation. Traders currently see a roughly 50% chance of the Fed cutting rates in June, but some officials are considering the possibility of higher interest rates if inflation doesn't go down.

Why it matters

The Fed's monetary policy decisions have significant impacts on the economy, financial markets, and consumers. Disagreements among policymakers about the appropriate path forward could lead to increased volatility and uncertainty as the central bank navigates high inflation and a tight labor market.

The details

According to the meeting minutes released Wednesday, some Fed officials thought supporting the labor market should be prioritized over controlling inflation, indicating disagreements over whether rates should be kept steady or even hiked. Traders currently see a roughly 50% chance of the Fed cutting rates in June, but the possibility of higher interest rates is also on the table if inflation doesn't subside.

  • The Fed held its January meeting in late January 2026.
  • The meeting minutes were released on February 19, 2026.

The players

U.S. Federal Reserve

The central banking system of the United States that sets monetary policy, including interest rates, to promote economic growth and stability.

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What’s next

The Fed's next policy meeting is scheduled for March 2026, where officials will further discuss the appropriate path forward for monetary policy.

The takeaway

The divisions within the Federal Reserve over the appropriate monetary policy stance highlight the challenges the central bank faces in balancing its dual mandate of price stability and maximum employment. Investors will be closely watching the Fed's next moves as it navigates high inflation and a tight labor market.