Chief Investment Officer predicts 4 interest rate cuts by 2026, Federal Reserve heads towards neutral interest rates

Chief Investment Officer Louis Navellier’s latest forecast suggests that the Federal Reserve will cut interest rates four more times by 2026, aiming to bring the rate down to a neutral level. This judgment is based on economic realities such as weakening housing prices intensifying deflation concerns and sluggish employment growth. While the forecast may not be entirely accurate, it reflects the market’s general expectation of a rate-cutting cycle.

The Triple Logic Behind Rate Cut Expectations

Navellier’s assessment is not unfounded but grounded in three specific economic observations:

Emerging Deflationary Pressures

Weakening housing prices are heightening deflation fears. This is a signal—when asset prices decline, the overall price level faces downward pressure, prompting the Fed to cut rates to provide liquidity support.

Insufficient Job Growth

The U.S. economy has not created many new jobs. Against the backdrop of weak employment performance, it is unreasonable for the Fed to maintain a tightening stance, which opens policy space for rate cuts.

Risk Progression Mechanism

Navellier also points out that if deflationary pressures intensify further, more rate cuts may be necessary. This means that four cuts could be just the baseline expectation, with actual reductions depending on economic data performance.

The Gap Between Expectations and Reality

Expectations of rate cuts have become a market consensus, but the specific pace remains debated. Navellier’s “four times” prediction is relatively concrete, but its realization depends on:

• Whether subsequent employment data remains weak
• Whether housing price declines accelerate
• Whether deflationary pressures truly emerge
• The Fed’s tolerance for risk

From a policy perspective, the Fed faces a dilemma: continuing tightening could exacerbate deflation risks, but rapid rate cuts might reignite inflation. In this balancing act, the expected number of rate cuts may be adjusted.

Potential Market Impact

The initiation of a rate-cut cycle generally benefits risk assets. Historically, an accommodative monetary policy environment has supported stocks, commodities, and cryptocurrencies. However, it is important to note that this rate cut is driven by economic weakness rather than overheating, which makes it somewhat different.

Summary

Navellier’s “four rate cuts by 2026” forecast reflects market expectations of a policy shift by the Fed. The core logic—deflation concerns and weak employment—is based on tangible economic phenomena, but the accuracy of the prediction ultimately depends on future data validation. Investors should not overinterpret a single forecast but focus on the actual economic projections and policy signals issued by the Fed. The rate-cut cycle may indeed be on the horizon, but the timing and magnitude remain to be confirmed by subsequent developments.