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Fed Swaps Signal 3 Basis Points Easing Expected by End of 2026

Data from Fed interest rate swaps on December 18 show traders anticipate modest policy easing amounting to 3 basis points by the close of 2026.

Summary

On December 18, market expectations reflected in Fed interest rate swaps indicated traders foresee a total of 3 basis points in policy easing by the end of 2026. According to Jinshi, the forecast suggests a slight reduction in the Federal Reserve’s monetary policy stance over the next three years.

Terms & Concepts
  • Interest Rate Swap: A financial derivative where two parties exchange interest rate payments, typically swapping fixed rates for floating rates.
  • Basis Point: A unit equal to 1/100th of a percentage point, used to measure interest rate changes.
  • Policy Easing: A monetary policy action aimed at lowering interest rates to support economic growth.