Wells Fargo no longer expects Fed rate cuts in 2026 as Iran war drags on

A Wells Fargo Bank is shown in Charlotte, North Carolina

Wells Fargo Investment Institute said on Monday it no longer expects the U.S. Federal Reserve to cut interest rates in 2026, citing uncertainty around inflation and heightened geopolitical risks tied to the Middle East war.

The institute, a subsidiary of lender Wells Fargo, had previously forecast two rate cuts from the U.S. central bank this year.

“Against the backdrop of a noticeable but likely transient inflation bump and elevated uncertainty, we believe that the balance of risks has shifted to incentivize patience from the Fed,” said Wells Fargo strategists.

Citigroup, meanwhile, pushed back its Fed rate-cut timeline, citing persistent inflation risks and unexpectedly strong U.S. job gains. Job growth rebounded in March as a strike by healthcare workers ended and warmer temperatures boosted activity in certain sectors.

The Wall Street brokerage now expects rate cuts totaling 75 basis points in September, October and December instead of June, July and September, according to a note dated April 3.

“We continue to think signs of a weakening labor market will result in cuts later in the year. But the timing of upcoming data suggests a later start to rate cuts than we had previously been expecting,” Citigroup said.

(Reporting by Kanishka Ajmera and Joel Jose in Bengaluru; Editing by Mrigank Dhaniwala and Jonathan Ananda)