KUALA LUMPUR (Jan 19): HSBC predicts the US Federal Reserve will maintain interest rates throughout 2026, citing no economic justification for a reduction.

Tax cuts, the artificial intelligence (AI) hardware boom, and robust equity prices will bolster US economic growth this year, according to HSBC chief Asia economist Frederic Neumann. 

This outlook places HSBC at odds with market consensus, which currently forecasts one or two rate cuts in 2026.

“HSBC is actually not expecting the Fed to cut interest rates,” Neumann said during an outlook webinar on Monday.

“It's not clear (if) the Fed necessarily has major macroeconomic justifications for cutting rates aggressively this year,” said Neumann, adding that US growth is expected to edge up to 2.3% in 2026, from 2.2% last year.

The US Fed delivered a 25 basis point cut in its last meeting in December last year, bringing the federal funds rate to 3.5%-3.75%.

Recently, tensions have heightened between the Trump administration and Fed chair Jerome Powell.

The Fed had been served grand jury subpoenas over renovations of its headquarters, an action Powell alleged was a consequence of policymakers’ reluctance to follow US President Donald Trump’s preferences on interest rates.

Powell’s term as Fed chair ends in May, though his term as a governor at the central bank runs until January 2028.

The Federal Open Market Committee’s next meeting is scheduled on Jan 27 and 28.