BNY strategists condition late-2026 Fed cuts on a Strait of Hormuz reopening and labor market weakening by Q3.
BNY strategists forecast two Federal Reserve rate cuts in Q4 2026, contingent on the Strait of Hormuz reopening and a softer labor market. Both conditions are expected to materialize by the end of Q3 this year.
Recent U.S. macro data, including a strong labor market, and elevated inflation prints reduce the likelihood of rate cuts in 2024. The strategists highlight upcoming CPI and PPI data as key hurdles for near-term policy easing.
A reopening of the Strait of Hormuz, though unlikely in the short term, could lower oil prices and shift Fed focus toward labor market conditions. However, current data does not suggest imminent labor market weakness.