JPMorgan sees Fed's next move an interest-rate increase, crypto bulls talk about cuts

The U.S. Federal Reserve's next interest-rate move is likely to be an increase and unlikely to occur before third-quarter 2027, JPMorgan (JPM) predicted, bucking some crypto analysts' outlook for lower borrowing costs, sooner.

The world's largest bank by market capitalization said on Friday it expects the Fed to hold rates steady with a 3.5%-3.75% target this year and raise by 25 basis points in the third quarter of 2027, according to Reuters.

This is in stark contrast to pricing in the CME's fed fund futures, which show traders positioned for two 25 basis-point rate cuts this year. Many crypto analysts also say they expect borrowing costs to decline, incentivizing greater risk-taking across the economy and financial markets. Bitcoin (BTC), often considered a pure play on fiat liquidity, is more sensitive to interest-rate expectations than traditional assets.

"Despite a difficult 2025, bitcoin may stage a comeback in?2026," Lukman Otunuga, senior market analyst at FXTM, said in an email to CoinDesk. "Lower interest rates and a thinning active supply could support prices."

Most crypto bulls expect the next Fed Chairman to be more dovish than the incumbent, Jerome Powell, whose term is set to end in early May.

JPMorgan's (JPM) prediction of higher rates aligns with bullish chart patterns in the 10-year Treasury yield CoinDesk discussed in November. The pattern suggests the benchmark bond yield could rise toward 6% in the coming year or so. It's currently about 4.18%.

The bank, however, maintained that rate cuts could be back on the table if the labor market weakens or inflation falls.

"If the labor market weakens again in the coming months, or if inflation falls materially, the Fed could still ease later this year," analysts at JPMorgan (JPM) said.

"However, we expect the labor market to tighten by the second quarter and the disinflation process to be quite gradual."

Several other investment banks have reassessed their rate-cut forecasts following Friday's U.S. employment data, which showed the jobless rate dipped to 4.4% in December.

Goldman Sachs (GS) and Barclays (BCS) now foresee rate reductions in September and December, following a lowering in June, compared with their previous projections of cuts in March and June.