What will the Federal Reserve do in 2026? The market is currently entangled in two conflicting narratives.

On one hand, the data is clear. The US third-quarter GDP growth rate reached 4.3% annualized, a figure that is quite robust—demonstrating the economy's resilience, which has exceeded many expectations. Against this backdrop, the necessity of Fed rate cuts naturally comes into question.

On the other hand, major institutions also have their voices. BlackRock's strategy analysts Amanda Lynam and Dominique Bly jointly released a report stating that, based on the current market situation, the Federal Reserve's rate cuts in 2026 are expected to be quite restrained, with no aggressive moves. Considering that this cycle has already seen a total of 175 basis points of rate cuts, the room and need for further easing are diminishing.

This tug-of-war is clearly affecting traders and investors—strong economic data supports hawkish expectations, while institutional analysis hints that the room for rate cuts is limited. The two narratives continue to battle in the market, and how it ultimately unfolds will depend on the upcoming inflation data and employment figures signaling what’s next.