Policy Path

1. Overall Summary

Across houses, 2026 is framed as easing but higher‑for‑longer: policy rates drift down from 2025 peaks, but end up well above the 2010s regime. Most see the Fed somewhere around 3–3.5% by late‑2026, with ~2–3 additional cuts from here, versus markets that had at times priced more aggressive easing Barclays p.19; UBS p.48, p.60; JPM p.1; BAML p.17]. The ECB is broadly expected to sit near 2% and mostly on hold, with disagreement over whether a further small cut or even a late hike happens around 2026–27 Goldman p.24; UBS p.22, p.60; KKR p.65; Barclays p.10]. The BoE is seen cutting, but only modestly (to roughly 3.25–3.5%), leaving UK rates a high‑carry outlier Barclays p.11; UBS p.60]. Japan is the clear hawkish outlier: BoJ policy rates rising toward ~1–1.5% with 10y JGBs near 2% Goldman p.24; UBS p.60; KKR p.66–67]. EM is generally described as already in or entering easing cycles, with LatAm and a subset of EMs delivering the deepest cuts BAML p.10, p.17; HSBC p.10, p.23; KKR p.60]. Structurally, several see more "financial repression" and higher term premia: long‑end yields around ~3.75–4.25% for the U.S. 10y and ~3% for Bunds are common anchors, with curves biased to steepen rather than re‑invert Goldman p.61; BAML p.19; UBS p.48, p.60; KKR p.61–62].

2. Where Analysts Agree

Global direction is easing, not hiking, in 2026. Most expect additional rate cuts from the Fed and other DMs, plus continued EM easing, though magnitudes differ: e.g., UBS sees two more Fed cuts by end‑1Q26 UBS p.22], BAML counts ~78 global cuts in 2026 BAML p.1], and JPM expects 2–3 Fed cuts through 2026 JPM p.1].
"Higher‑for‑longer" versus the 2010s is a shared premise. JPAM stresses that bond markets price Fed ~3.25% and ECB ~1.75% by mid‑2026 but "not back to the exceptionally low" pre‑COVID levels JPAM p.11]; KKR pegs neutral Fed funds at 3.375% with 10y UST at ~4% KKR p.61–62]; T. Rowe likewise expects structurally higher long‑end yields driven by deficits and labor shifts TRowe p.10–11].
BoJ is the DM outlier hiking. Goldman, JPAM and UBS all see Japan still normalizing upward (BoJ at ~0.75–1.0% by end‑2026) while others are cutting or on hold Goldman p.24; JPAM p.11; UBS p.60]; KKR goes further, projecting 1.5% by 2027 with JGBs ~2% KKR p.66–67].
Curves are expected to steepen modestly. Goldman holds US and European steepening biases Goldman p.13, p.23]; BAML's rates team favors "long belly, steeper curve, lower real rates" BAML p.17]; T. Rowe says Fed cuts + sticky inflation give the US curve a "steepening bias" with upward pressure at the long end TRowe p.18]; BlackRock and KKR both stress rising term premia at the long end even as front‑end policy is eased BlackRock p.7; KKR p.61–62].
EM generally remains in or near easing cycles. HSBC notes "lower Fed rates create room for Asian central banks to cut rates further" HSBC p.10] and expects further Banxico cuts HSBC p.23]; KKR notes ~23% of EM central banks are already cutting KKR p.60]; BAML calls 2026 "the year of easing in EM," with LatAm delivering the deepest cuts BAML p.10, p.17].
Fed cuts are seen as shallow vs prior cycles. JPM sees only 2–3 cuts through 2026, with inflation near 3% constraining more JPM p.1, p.5]; HSBC argues inflation is "too sticky" and growth too resilient for the scale of cuts markets price HSBC p.5]; UBS's base case Fed funds upper bound is 3.33–3.50% in Dec‑2026 UBS p.48, p.60], implying moderate easing only.
Balance sheets remain large or re‑supportive. Barclays highlights the Fed halting QT and reinvesting all Treasuries, BoE slowing QT, and ECB retaining its TPI Barclays p.20]; UBS expects G7 central‑bank balance sheets to "remain high" and sees more frequent interventions that anchor yields below what debt fundamentals imply UBS p.37–38]; MS stresses QT ended early and sees the Fed ready to re‑expand via repo and other tools MS p.11].

3. Where Analysts Disagree

How dovish is the Fed path? MS and BAML lean toward more easing than markets expect, with MS arguing the Fed will "run it hot" and be "more accommodative than the market currently thinks into 2026" MS p.5, p.11], and BAML expecting a trough at 3.00–3.25% after 78 global cuts BAML p.1, p.17]. By contrast, HSBC and JPM see a more patient or earlier‑ending cycle: HSBC worries the Fed may "delay or end its rate cut cycle in December" with limited downside in yields HSBC p.3, p.5], and JPM sees a cautious Fed delivering only 2–3 cuts versus ~80bp priced JPM p.5]. KKR is dovish in 2026 (Fed to 3.125%) but explicitly models re‑tightening in 2027 KKR p.61–62].
ECB in 2026: cut, hold, or even hike? Barclays thinks markets overestimate ECB stasis and see cuts as "much more prevalent" than hikes Barclays p.10, p.19]; Goldman and UBS expect the ECB to hold steady at 2% "for the foreseeable future" Goldman p.24; UBS p.22, p.60]; KKR goes the other way, judging real rates near zero as accommodative and projecting one hike to 2.25% in 2027 KKR p.65–66]. HSBC implies the ECB is already easing and supportive of EUR HSBC p.24], whereas T. Rowe sees scope for another cut in March 2026 but otherwise emphasizes fiscal‑driven upward pressure on Bund yields TRowe p.4–5].
How much BoE easing is realistic? Barclays thinks the BoE will cut slowly (one cut in 2026 to 3.5%) but with downside surprise risk if unemployment >5% Barclays p.11, p.19]; UBS expects two cuts to 3.25% UBS p.60]; T. Rowe believes the BoE "should be able to ease rates more than is currently priced in" given fiscal consolidation TRowe p.4]; HSBC is more contingent, suggesting tax hikes could force a more dovish BoE but keeps gilts neutral HSBC p.22].
Role and direction of the long end: term premium vs financial repression. BlackRock, T. Rowe, JPM and KKR emphasize structurally higher term premia and long‑end yields from leverage, deficits and reduced QE, leading to underweights in long USTs BlackRock p.7–8; T. Rowe p.10–11; JPM p.1, p.5; KKR p.61–65]. UBS and MS, by contrast, stress repression and support: UBS expects more frequent interventions and regulatory channels that "anchor" yields below debt‑implied levels UBS p.36–38], while MS stresses early QT termination, repos and potential buybacks as tools to keep the long end "contained" in its bull/base cases MS p.11, p.22–23].
Fed's inflation tolerance and regime narrative. MS explicitly argues the government "has no choice but to let inflation run hot" and the Fed is operating under a de facto financial‑repression/"run it hot" regime MS p.11–12], similar in spirit to KKR's "Regime Change" thesis (structurally higher neutral and positive stock‑bond correlation) KKR p.12, p.61–62]. UBS also talks about a repression regime but still assumes inflation is managed and Fed policy remains data‑driven UBS p.36–38, p.22]. Stifel and JPM are much more orthodox: they frame Fed easing as cautious, with real rates only returning to ~1% and warn that cutting below neutral risks being "too late" and reigniting boom‑bust cycles rather than deliberately running inflation above target Stifel p.4, p.37; JPM p.5].

4. Core Narrative by Sub-Areas

A. Fed and US curve: shallow cuts, regime split between "run it hot" vs cautious normalization

Moderate‑easing / cautious camp (JPM, HSBC, UBS, JPAM, Barclays, T. Rowe, Stifel).
JPM expects 2–3 Fed cuts through 2026 in a "rate normalization mode," with 2y at 3.5–3.75% and 10y at 4.0–4.5%, i.e., modest steepening and range‑bound long rates JPM p.1, p.5].
HSBC sees inflation "too sticky" and growth too resilient for the number of cuts markets price, warning the Fed may end its cut cycle as early as December, limiting downside in yields and keeping only "medium" duration HSBC p.3, p.5].
UBS baseline has Fed funds upper bound at ~3.33–3.50% by Dec‑2026, with two additional cuts by end‑1Q26 and then a pause around neutral UBS p.22, p.48, p.60].
JPAM cites forwards implying Fed ~3.25% by mid‑2026 and stresses higher average rates vs pre‑COVID JPAM p.11].
Barclays "pencils in a couple of interest rate cuts in 2026," with markets pricing "just above 3%" by end‑2026 and the authors stressing 2026 is "exceptionally unclear" Barclays p.6, p.19].
T. Rowe warns the Fed "may not be able to lower rates next year at all" if inflation stays elevated and fiscal/tariff pressures persist; its macro guide assumes no cuts in 1H26, with any later easing highly conditional TRowe p.3, p.5].
Stifel explicitly reads the fed funds futures curve at 3% in Dec‑2026 and consensus 2% core PCE as implying a 1% real rate—roughly the post‑WWII median—and expects the Fed to cut below neutral again, but worries this may be "too late" and fully priced into risk assets Stifel p.4, p.37].

Dovish / “run it hot” camp (MS, BAML, BlackRock, KKR to a point).
MS argues the Fed will be "more accommodative than the market currently thinks into 2026," with QT ended early, standing repo support, and an administration that "has no choice but to let inflation run hot" to erode debt MS p.5, p.11–12]. They explicitly expect continued cuts through 2026 and see this as valuation‑supportive, with only later (post‑2026) re‑tightening if inflation flares MS p.11–12, p.22–23].
BAML's macro team expects a final Powell cut in Dec 2025 and two more 25bp cuts under a new dovish Chair in June/July 2026, targeting a terminal 3.00–3.25%, and build strategy around "long belly, steeper curve, lower real rates" BAML p.17]. Hartnett's "78 global cuts + 9% EPS growth" mantra explicitly relies on a broad easing cycle BAML p.1, p.17].
BlackRock also expects "continued Fed easing into 2026" on the back of a "no hiring, no firing" labor stasis and sticky but tolerable inflation BlackRock p.5, p.15]. However, they pair that with a structural rise in term premium from leverage, leading them to underweight long USTs despite cuts BlackRock p.7, p.16].
KKR's base case is dovish in 2026 (Fed cut to 3.125%, below its 3.375% neutral estimate) but explicitly cyclical: they model a hike back toward neutral in 2027 and highlight that going below neutral with inflation rising already represents a "maximally dovish" stance outside recessions KKR p.61–63].

Implication: Consensus is for a Fed around 3–3½% by end‑2026, with a slight easing bias and modest curve steepening. The fault line is whether this is a front‑loaded, cautious normalization (JPM/HSBC/UBS) or a prolonged, financial‑repression‑style cutting regime that deliberately tolerates higher inflation (MS/BAML/KKR framing).

B. Europe and UK: ECB ambiguity, BoE modest easing but high carry

ECB:
Goldman and UBS think the ECB basically sits on its hands: UBS has the depo rate at 2.00% in June and Dec‑2026, seeing inflation dipping below target but stable expectations allowing a steady stance UBS p.22, p.60]; Goldman: "We expect the ECB to hold rates steady 'for the foreseeable future'" Goldman p.14].
Barclays is notably more dovish, arguing markets overprice stasis and that cuts are more likely than hikes, especially if German fiscal stimulus underwhelms and France/Italy remain weak Barclays p.10, p.19].
T. Rowe sees scope for one more cut (March 2026), driven by weaker 2026 manufacturing after tariff front‑loading and bund‑yield‑driven tightening, but then highlights structural inflation/fiscal pressures that push long Bund yields higher TRowe p.4–5, p.10–11].
KKR stands out as mildly hawkish: with real rates near zero and credit growth restoring, they see current policy as still accommodative and model a final 25bp hike to a 2.25% neutral depo rate in 2027, alongside 10y Bund yields around 3% KKR p.65–66].

BoE / UK:
UBS projects two cuts in 2026, taking the BoE rate from 4.0% to 3.25%, but still leaving UK yields above US and eurozone UBS p.42, p.60].
Barclays has a base case of one cut in 2026 (to 3.5%) but stresses that if unemployment surpasses 5% the BoE "may ease more aggressively," and that the end‑2026 3.5% priced base rate "could be well undershot" if the labor market weakens further Barclays p.11, p.19].
T. Rowe is more explicitly dovish relative to pricing, asserting that fiscal consolidation pressure should let the BoE "ease rates more than is currently priced in" TRowe p.4].
HSBC emphasises the Autumn Budget as a key trigger: any tax‑hike‑driven growth hit would likely prompt a "dovish response" from the BoE HSBC p.22].

Implication: For allocation, the most durable consensus is moderate easing with UK rates structurally above US/EUR, supporting GBP carry; the open question is whether the ECB indeed holds at 2% or is forced to cut once more (Barclays/TRowe), or eventually hike once (KKR) as real rates normalize.

C. Japan: structural normalization but enduring negative real rates

UBS, Goldman and JPAM all see the BoJ continuing to raise rates gradually: UBS forecasts 0.75% policy in June 2026 and 1.0% in Dec‑2026, with 10y yields at ~1.8% UBS p.60]; Goldman expects further hikes given 41 months of above‑target inflation and robust growth Goldman p.14]; JPAM notes Japan is the only major APAC market where rates are expected to rise slightly in 2026 JPAM p.11].
KKR is more aggressive but similar directionally: policy rate to 1.5% by 2027 and 10y JGBs at 1.9–2.1%, yet still a "Goldilocks" negative real‑rate environment supportive of capex KKR p.66–67].
BlackRock and BAML express this primarily through asset views: both are underweight JGBs as rate hikes, global term premium and heavy issuance push yields higher BlackRock p.16; BAML p.19].

Implication: Japan is widely treated as a slow‑moving hiking outlier, offering better nominal yields but still negative real rates in most scenarios—supporting equity over bonds and making JPY a candidate for gradual appreciation as US‑Japan differentials narrow.

D. EM & China: early movers in the easing cycle, with LatAm most dovish

LatAm and broader EM:
BAML calls 2026 "the year of easing in EM," highlighting LatAm, especially Brazil, as having "the deepest easing cycle to come" BAML p.10, p.17].
KKR notes some 23% of EM central banks are already cutting with "more room to run" KKR p.60, p.104].
HSBC expects further Banxico cuts as growth decelerates HSBC p.23], and sees EM real rates as "significantly high" vs history, giving room to ease HSBC p.23].
BlackRock posits that EM local easing has largely played out in performance terms and pivots to EM hard‑currency credit, supported by a weaker dollar and lower US rates BlackRock p.14–16].
Goldman forecasts "continued easing across several emerging market economies," underpinned by a subdued USD and lower oil Goldman p.14].

Asia / China:
HSBC expects lower Fed rates to give Asian central banks room to cut "amid soft inflation and stable currencies" HSBC p.10], and notes PBoC bond purchases as evidence of easing HSBC p.23].
KKR expects the PBoC to cut short‑term policy rates by 20–30bp, with 10y CGB yields falling to ~1.55% in 2026 KKR p.50–51, p.61].
T. Rowe views PBoC as reluctant to cut but open to "one rate cut in early 2026" if domestic conditions soften TRowe p.4–5].
UBS focuses more on China's fiscal/industrial support than on policy‑rate forecasts but expects lower regional rates to support APAC ex‑Japan growth into late‑2026 UBS p.23, p.25].

Implication: EM is broadly seen as ahead of DMs in easing, with the richest remaining policy‑cut beta in LatAm; the consensus is that EM policy is a tailwind rather than a risk, conditioned on local politics and US dollar behavior.

E. Structural themes: financial repression vs higher term premia

Financial repression / yield‑capping narrative (UBS, MS, Barclays to a degree).
UBS explicitly forecasts a shift toward financial repression as G7 debt rises from ~126% to 137% of GDP by 2030, with more frequent interventions and regulatory channels "anchoring" yields below debt‑implied levels and central‑bank balance sheets staying high; adjustment moves to FX rather than rates UBS p.36–38].
MS sees the Fed effectively monetizing front‑end issuance via repo and early QT termination, arguing this is part of a deliberate "run it hot" / financial repression regime to keep nominal growth above borrowing costs MS p.11–12, p.22–23].
Barclays talks up a quasi "operation twist with a twist," with CBs potentially buying longer maturities while Treasuries issue shorter, to mitigate supply‑driven stress Barclays p.20].

Higher term‑premium / less bond ballast narrative (BlackRock, KKR, T. Rowe, JPM).
BlackRock emphasizes leverage‑driven upward pressure on rates, rising term premia, and underweights long USTs, adding that long bonds no longer offer the portfolio ballast they once did BlackRock p.7–8, p.16].
KKR's "Regime Change" thesis formalizes a positive stock–bond correlation, 10y UST equilibrium around 4%, and more volatile yields, arguing bond hedging is structurally weaker KKR p.12, p.61–62, p.79, p.135].
T. Rowe highlights that expansionary fiscal plus structural labor shifts reinforce inflation risk and "higher longer‑maturity yields, particularly on U.S. Treasuries," giving the curve a steepening bias TRowe p.10–11, p.18].
JPM similarly sees long‑term rates "range bound" but at relatively high levels (10y 4.0–4.5%) with modest steepening, and warns that bond‑equity diversification is conditional as inflation and debt uncertainty rise JPM p.1, p.5].

Implication: All agree bonds won’t go back to the 2010s; the split is whether the public sector successfully suppresses yields (UBS/MS/Barclays) or whether debt and leverage push term premia sustainably higher (BlackRock/KKR/T. Rowe/JPM).

5. Key Conditional Risks

Inflation surprises (up or down).
Upside risks from tariffs, immigration restrictions, AI‑driven energy demand and services inflation (Barclays Barclays p.6], HSBC HSBC p.5], MS MS p.11]) could force shallower or delayed cuts—and in the MS bear case, a return to hiking in 2H26 MS p.22–23].
Conversely, faster‑than‑expected disinflation or tariff reversals (e.g., a Supreme Court ruling curbing tariff powers in JPM's scenario JPM p.4]) would give the Fed and ECB more room to ease, pushing Fed funds toward UBS's bear‑case 1.5% and UST 10y to 2.5% UBS p.48].

Labor‑market and growth shocks.
A sharper deterioration in US or UK labor markets—beyond the "no hiring, no firing" baseline—would argue for deeper cuts than JPM/HSBC currently assume; Barclays explicitly flags BoE easing faster if UK unemployment exceeds 5% Barclays p.11].
On the other side, if AI‑driven capex keeps growth robust and hiring re‑accelerates (BlackRock's risk BlackRock p.5]; KKR's high‑case scenario KKR p.57–58]), central banks may halt cuts early or even re‑tighten.

Fiscal and debt‑sustainability events.
A US or European fiscal shock (e.g., new unfunded programs, French spread blow‑out) could steepen curves sharply and test financial repression assumptions, potentially forcing higher long‑end yields and constraining CBs' ability to ease KKR p.64–65; UBS p.36–37; HSBC p.21–22].
Conversely, credible medium‑term consolidation (e.g., UK fiscal tightening, US adherence to OBBB path) supports HSBC's view that term premia are "already priced" and reduces upside yield risk HSBC p.21–22; T. Rowe p.4].

Political and governance shocks (Fed chair, independence, trade policy).
A very dovish or hawkish Fed Chair appointed in May 2026 could meaningfully shift the US reaction function: BAML effectively bakes a dovish chair into its extra 50bp of cuts BAML p.17], while HSBC and Goldman emphasize volatility and uncertainty around the nomination HSBC p.22; Goldman p.7].
Fed independence concerns or overt political pressure could either accelerate easing (BAML's lower trough view BAML p.17]) or spark market backlash that steepens curves and tightens financial conditions Goldman p.7; HSBC p.3].
Trade policy shifts—tariff escalations or rollbacks—would alter both inflation and growth trajectories, forcing recalibration of Fed/ECB paths (KKR p.27–28](KKR 2026 Outlook.pdf#page=27); UBS p.47].

Market accidents: credit events, AI unwind, or EM political shocks.
An AI or tech‑driven equity correction, or a credit accident amid tight spreads and rising "shadow defaults" (JPAM JPAM p.71–72]), could push central banks into emergency easing beyond current baselines.
EM‑specific risks—LatAm elections, EM policy slippage—could derail the assumed easing wave and trigger local re‑tightening (BAML p.17](RIC 2026 BAML.pdf#page=17); HSBC p.25].

6. Bottom Line

Positioning for 2026 should assume modest front‑end easing with no return to 2010s ultra‑low rates, a Fed converging near ~3–3½%, an ECB anchored around 2%, a BoE in the low‑3s, and 10y UST/Bund yields gravitating toward roughly 3.75–4.25% and 3.0%, respectively UBS p.48, p.60; KKR p.61; BAML p.19]. The investable edge lies less in calling "more cuts vs fewer" in isolation, and more in exploiting regional divergence and curve shape—favoring selective steepeners, UK/Japan relative value, and EMs with credible easing room—while recognizing that renewed inflation or fiscal stress could rapidly re‑price this shallow‑easing consensus.

DM policy rate path to 2026 — Expected cuts/hikes, timing, and end‑2026 levels

Source	Content
Brookfield Outlook	Policy rates in developed markets are treated as having peaked and moving into a measured easing phase, with “additional potential rate cuts in the U.S. and Europe” and “additional interest‑rate cuts” expected to lower borrowing costs and support higher deal activity and refinancing into 2026 [p.18, p.20, p.22, p.29–31].
Goldman Outlook - Summary	Fed leans toward a first rate cut around December 2025, with potential for two further cuts during 2026 under a soft‑landing base case [p.12, p.14]. ECB is expected to hold policy rates steady “for the foreseeable future,” while BoE could resume cuts in December 2025, and BoJ is expected to hike rates as an outlier amid above‑target inflation and robust growth; other G10 paths are mixed, with Sweden’s easing cycle likely complete if growth improves, Australia’s cuts potentially paused by upside inflation surprises, Norway’s easing possibly continuing, New Zealand seeing scope for further cuts, and a return to negative rates in Switzerland viewed as unlikely [p.14].
Barclays Outlook	Across the US, UK and eurozone, forward curves embed “more easing…in 2026” with policy rates on a mostly downward trend [p.19]. Fed policy is pencilled as “a couple of interest rate cuts in 2026,” with forwards implying a rate “just above 3% by end‑2026” amid substantial uncertainty [p.6, p.19]. BoE is projected to deliver one cut in 2026, taking Bank Rate to 3.5%, though this level “could be well undershot” if the labour market weakens [p.11, p.19], while the ECB policy rate is at 2% with markets pricing no 2026 move but a higher probability of cuts than hikes if growth disappoints [p.10, p.19].
Blackrock Outlook	Fed policy is on a continued easing path into 2026, with policy rates “kept trimming” as labor markets stay in a “no hiring, no firing” stasis even while inflation remains sticky above 2% [p.5, p.15]. BoJ is in a hiking/normalization phase, with “rate hikes” likely to keep driving JGB yields higher [p.16]. ECB and BoE paths are treated as broadly in line with current market pricing [p.16].
Goldman Outlook	Fed is expected to lean toward a December 2025 cut with two further cuts in 2026, leaving end‑2026 Fed funds in a 1.5–4% range depending on macro scenarios (hard landing to re‑acceleration) [p.23]. ECB is expected to hold at 2% through an “extended pause” into 2026 unless inflation undershoots, while BoE likely resumes cuts from December on easing inflation and soft labor, and BoJ hikes further as the only DM moving into a higher‑rate regime [p.6][p.11][p.24]. Across other G10, 9/10 are projected to cut in 2025 with varied 2026 endpoints, including more cuts in New Zealand, continued easing in Norway, possible pauses in Australia, and no return to negative rates in Switzerland, with a chart showing current vs end‑2026 policy levels for US, Eurozone, UK, Japan, New Zealand, Australia, Sweden, Norway, Switzerland, and Canada [p.6][p.24].
HSBC Outlook	Fed is near the end of its easing cycle, with a clear risk that cuts are delayed or stopped as early as December, meaning fewer cuts than markets price and limited further downside for US Treasury yields into 2026 [p.3, p.5]. ECB is already in an “early easing” phase, BoE could be pushed more dovish by growth‑dampening tax rises, while the RBA remains relatively hawkish on the back of strong Australian cyclical data [p.22, p.24].
JPAM Outlook	Global policy rates are in an easing phase into mid‑2026, with bond markets pricing Fed funds around 3.25% and the ECB policy rate around 1.75% by mid‑2026, while most APAC rates have peaked and retreated except Japan, where the BoJ is expected to raise rates slightly in 2026 [p.11]. By late‑2025 the Fed has already delivered two “precautionary” 25bp cuts (50bp total), taking the benchmark to its lowest level in three years, and policy rates are not expected to return to the “exceptionally low” pre‑COVID levels [p.11, 71].
JPM Outlook	Fed policy is expected to follow a shallow easing path with 2–3 rate cuts through 2026, with markets having priced roughly 80 bps of cuts over that horizon even as Powell stressed further adjustments are “far from a foregone conclusion” [p.1][p.5]. Outside the U.S., DM policy is described as “easier global monetary policy” [p.8].
MS - 2026 US Equities Outlook - The Rolling Recovery Is Here	Fed is in a cutting regime with markets pricing three additional 25bp cuts over the next year, and policy is expected to be “more accommodative than the market currently thinks into 2026,” potentially cutting “for longer—i.e., through 2026 vs. more front‑half loaded” [p.5, p.11, p.22]. A 2‑year up‑cycle beginning April 2025 is anchored on continued easing until inflation forces tightening, with a bear case in which the Fed must start raising rates in the back half of 2026 after an inflation flare‑up [p.12, p.22–23]. Canada is highlighted as a qualitative template of aggressive cuts alongside rising unemployment and rising equities [p.21–22].
KKR 2026 Outlook	Fed funds is projected at 3.125% in 2026 (one cut below a 3.375% neutral) with the Fed easing into 2026 then re‑tightening in 2027, alongside a 10‑year U.S. yield of 4.25% [p.61–62]. ECB depo is held flat through 2026 at a mildly accommodative level before a single 25 bps hike in 2027 to 2.25%, with the 10‑year bund around 3.0% at end‑2026 [p.61, p.65–66]. BoJ policy rate rises gradually on a predictable path toward 1.5% by 2027, with 10‑year JGB yields at ~1.9% in 2026, while the PBoC trims short‑term policy rates by 20–30 bps and 10‑year China yields hover near 1.55% in 2026 [p.50–51, p.61, p.66–67].
RIC 2026 BAML	Global policy is framed as an easing cycle with roughly 78 rate cuts in 2026, underpinned by stable growth (global GDP 3.3%) and moderate inflation (global CPI 2.4%) [p.1–2, p.17]. Fed funds are projected to be cut once more in December, then by an additional 50bp in June and July under a new, more dovish Chair, reaching a terminal rate of 3.00–3.25% [p.17]. Long‑rate forecasts for end‑2026 include UST 10y at 4.25%, Bund 10y 2.75%, JGB 10y 2.00%, and UK 10y 4.90% [p.2, p.19].
TRowe Outlook	Fed is constrained by sticky inflation and high debt, with no rate cuts expected in 1H 2026 and a risk that it may not be able to lower rates at all in 2026, although a separate asset‑allocation view assumes some cuts later in the year [p.3, p.5, p.15]. ECB is in an easing cycle with potential for another rate cut in March 2026 and scope for further dovishness if growth disappoints or the euro strengthens beyond USD 1.20 [p.4–5]. BoE should be able to ease more than is currently priced, while BoJ is an outlier expected to hike policy rates gradually and possibly by more than currently anticipated; EMs are late in easing cycles with further but limited cuts likely, and the PBoC could deliver one rate cut in early 2026 if domestic conditions soften [p.4–5, p.18].
Stifel Outlook	Fed likely cuts rates through 2026 to around 3% on fed funds futures by Dec‑2026, implying a ~1% real policy rate using one‑year‑ahead core PCE at 2% [p.4, p.37]. Real policy is expected to be below neutral (Laubach‑Williams r*) again in 2026, with concern that the easing comes “too late” to avert recession [p.4].
UBS Year Ahead	Fed funds are forecast to decline via two additional cuts by end‑1Q26 toward a neutral stance, with the upper bound at ~3.33% in June and Dec 2026 and scenario ranges of 4.00% (bull), 3.50% (base), and 1.50% (bear) by Dec 2026 [p.22, p.48, p.60]. ECB is expected to remain on hold with the deposit rate at 2.00% in June and Dec 2026, BoE to deliver only two cuts leaving Bank Rate at 3.25% in 2026, SNB at 0.00% with no further cuts, and BoJ gradually hiking to 0.75% (June 2026) and 1.00% (Dec 2026) [p.42–43, p.60].

Central bank reaction functions — Inflation vs labour vs fiscal/financial‑stability drivers

Source	Content
Brookfield Outlook	n.a.
Goldman Outlook - Summary	Fed reaction function is framed around a continued focus on labor market weakness, with deeper labor deterioration seen as a key trigger for earlier or larger cuts, and growth risks tied to consumer health, tariff passthrough, and AI‑capex sustainability [p.11–12, p.14]. BoE’s potential December cuts hinge on improved inflation, a relatively weak labor market, and potential tax hikes, but are constrained by heightened political and fiscal uncertainty [p.14]. BoJ hikes are linked to inflation running above target for 41 months, robust growth, and looser fiscal policy, while EM easing is supported by a subdued USD and lower oil prices that ease inflation risks [p.14].
Barclays Outlook	Fed reaction function has shifted from an inflation focus to labour‑market conditions, with clear signs of weakening employment supporting modest cuts, but sticky inflation (tariffs, immigration, AI‑related energy demand) and political risks could quickly re‑tilt it hawkish [p.6, p.19]. BoE easing pace in 2026 is explicitly contingent on inflation staying contained and labour stability, with unemployment above 5% likely triggering more aggressive cuts, and fiscal tightening giving extra room to loosen policy [p.11–12]. ECB’s stance balances disinflation (weak growth, limited real wage gains, possible Chinese “exported deflation”) against political and fiscal fragilities, with the reaction function skewed toward cuts if growth or periphery spreads deteriorate [p.9–10, p.19–20].
Blackrock Outlook	Fed reaction balances sticky‑above‑target inflation with a stalling labor market that allows gradual cuts, while also constrained by “policy tensions with debt sustainability” if renewed hiring reignites inflation [p.5, p.7]. DM policy more broadly is framed as operating under higher leverage and elevated debt‑servicing costs, limiting capacity to cushion shocks and tying monetary choices to fiscal/financial‑stability considerations [p.4, p.7].
Goldman Outlook	Fed reaction function is described as heavily labor‑market‑driven (“labor market holds the key”), cutting more if unemployment rises and inflation stays anchored, with tariffs, immigration restrictions, federal layoffs, and labor‑saving AI shaping both inflation and employment outcomes [p.6][p.23]. ECB’s reaction hinges on inflation relative to the 2% target and German fiscal expansion, with a relatively hawkish bias that keeps rates on hold unless inflation meaningfully undershoots [p.6][p.11][p.24]. BoE policy is tied to easing inflation, soft labor, and tighter fiscal policy, BoJ to persistent above‑target inflation plus strong growth and looser fiscal policy, and political/fiscal risks (including pressure on Fed independence and global debt‑sustainability worries) are highlighted as additional drivers that can alter reaction functions and curve pricing [p.6][p.7][p.13][p.24].
HSBC Outlook	Fed reaction is constrained by “sticky” inflation and resilient economic activity, which together argue against deep cuts even as some investors worry about future layoffs and weaker consumer demand [p.5]. US fiscal concerns are seen as largely priced into the term premium after the OBBB Act, while in the UK any fiscal tightening via tax hikes could hit growth and trigger a more dovish BoE response [p.21–22].
JPAM Outlook	Rate cuts in the U.S. and euro area are framed as pre‑emptive “normalization” steps occurring before significant job losses or economic slowdown, enabled by strong labor markets and rising wages, and supported by higher starting policy rates that give central banks flexibility to respond more aggressively if headwinds emerge [p.11]. Recession probabilities (30% U.S., 25% euro area) sit modestly above historical averages, and fiscal challenges in Europe are part of the backdrop [p.11].
JPM Outlook	Fed reaction function is framed around a dual‑mandate tension, with inflation hovering near 3% plus new tariff‑related pressures making officials wary of upside inflation risk even as labor markets cool via slower hiring rather than mass layoffs, arguing for measured rather than aggressive easing while policy is near “neutral” [p.3][p.5]. Political pressure and possible new appointees may tilt some members toward easier policy, but a “quiet, resolute stance” defending independence is also highlighted, underscoring internal divisions about how quickly to cut [p.5].
MS - 2026 US Equities Outlook - The Rolling Recovery Is Here	Driven by a desire to “run it hot,” the Fed is seen tolerating above‑target inflation to keep nominal GDP (6–7%) above borrowing costs and work down high debt/deficit levels, effectively prioritizing debt dynamics and nominal growth over a strict 2% inflation target [p.11–12]. Weakening labor indicators (alternative unemployment measures, layoffs, sentiment) justify a more dovish stance, but a “third mandate” of financial stability and the need to facilitate Treasury funding (via early QT termination and liquidity facilities) are described as key determinants of policy; an eventual inflation impulse that becomes “too much” is the trigger for a renewed hiking cycle in the bear case [p.4–5, p.11–12, p.22–23].
KKR 2026 Outlook	Fed reaction is skewed toward the labor side of its dual mandate, cutting below neutral to a slightly negative real rate in 2026 despite an anticipated rise in core CPI, with more aggressive easing (<3.125%) reserved for clear recessionary labor‑market stress [p.61–63]. ECB views current near‑zero real rates and resurgent credit growth as evidence of accommodative policy, allowing some removal of support via QT and one further hike as inflation normalizes near 2% and banking metrics stay healthy [p.43, p.65–66, p.114–115]. BoJ tolerates extended negative real rates to support capex and reflation within a broader fiscal‑industrial “Abe‑ism 2.0” framework, while PBoC policy balances modest easing against structural deflation and confidence drags, and all DM central banks face potential recalibration in response to tariffs, energy shocks, and fiscal deficits [p.27–28, p.37–38, p.50–52, p.53–54, p.64–67].
RIC 2026 BAML	Fed reaction is explicitly tied to a dichotomy of robust spending versus soft labor data, with the next cut driven by a jump in the unemployment rate and low‑conviction easing in response to “emerging downside risks in the labor market,” even as services strength “puts a floor under labor demand” [p.17]. Further Fed cuts are linked to leadership change and perceived dovishness of the incoming Chair, while concerns about Fed independence and growth slowdown influence the expected cutting trough [p.17]. In Europe, more dovish central banks are expected to counter rising risk premia and slowing global growth by driving falling real bond yields, and in Japan, modestly higher yields coexist with fiscal expansion, implying a gradual normalization rather than aggressive tightening [p.3, p.17, p.19].
TRowe Outlook	High public debt, tariffs, and immigration restrictions keep U.S. inflation above target, limiting Fed easing and creating tension between supporting employment and controlling prices, with political pressure increasing the risk of running policy too loose and pushing long‑term yields higher [p.3, p.11]. ECB and BoE face weaker growth and evolving labor‑market structures and may lean toward looser policy to support employment even at the cost of higher inflation, while BoJ is reacting to emerging wage and price pressures amid fiscal stimulus by moving toward more tightening [p.4, p.11]. EM reaction functions are anchored by relatively benign inflation and improved debt profiles, allowing some room to cut, whereas the PBoC prioritizes targeted credit tools but may cut rates if domestic softness persists [p.4–5, p.18].
Stifel Outlook	Fed reaction function is framed around forward inflation (e.g., Dec‑2025 funds minus Dec‑2026E core PCE), with policy judged relative to expected inflation and the neutral rate [p.4, p.37]. Labour‑market deterioration and recession risk are important constraints, as rising unemployment and a tenuous jobs backdrop imply non‑trivial risk of a downturn even as easing begins [p.8–10]. Financial‑stability considerations enter via a tightening Financial Conditions Index and rich equity/credit valuations, which increase the risk that policy mis‑timing triggers asset‑price corrections [p.3, p.29–30].
UBS Year Ahead	Fed reacts to a combination of tariff‑related inflation (peaking just above 3% in 2Q26) and a softer labor market with moderate easing while remaining data‑dependent and willing to cut more aggressively (200–300bps) in a disruption scenario [p.22, p.48]. ECB’s reaction function leans on inflation and expectations, with falling headline inflation below 2% but stable expectations justifying a prolonged on‑hold stance, while broader discussion links high public debt and financial‑stability concerns to a greater likelihood of yield‑suppressing interventions (financial repression) across G7 [p.22, p.36–37].

Yield curve & term premium views — Steepening/flattening, long‑ vs short‑end under policy

Source	Content
Brookfield Outlook	n.a.
Goldman Outlook - Summary	Curve positioning is highlighted as central, with explicit steepening biases in US and European curves, reflecting long‑term structural trends and fiscal perceptions [p.11]. Neutrality on overall US duration is paired with the view that Treasuries could rally if labor weakness intensifies, while fiscal dynamics and prospective European fiscal expansion plus possible inflation undershooting support active curve trades and steepener expressions [p.11].
Barclays Outlook	Divergence in US, UK and eurozone policy paths is expected to be expressed primarily via curve and duration positioning, rather than a uniform duration bet, with high‑quality developed government bonds used as diversifiers against weaker growth [p.18, p.46]. Heavy sovereign issuance and high debt levels point to upward pressure on term premia, but this may be mitigated by central banks’ more active presence at the long end and potential “operation twist with a twist” maturity‑management strategies [p.20].
Blackrock Outlook	Higher public and private borrowing and elevated debt‑servicing costs are expected to push term premia and long‑dated yields higher, leading to a tactical underweight in long U.S. Treasuries, while short‑dated Treasuries are neutral as short‑end yields fall with policy rates [p.7, p.16]. This configuration implies steepening pressure as policy rates are cut at the front end while long‑end yields stay elevated, and long Treasuries are seen as losing their traditional diversification/ballast role in portfolios [p.7–8].
Goldman Outlook	Front‑end yields are described as primarily sensitive to central bank policy and retaining strong counter‑cyclical, hedging properties in downturns, while long‑end yields are more driven by fiscal concerns and inflation expectations, increasing the risk of curve steepening when those worries rise [p.13]. Portfolio positioning favors diversified duration with explicit steepening biases in US and Europe, reflecting expectations that policy easing works through the front end while long ends remain pressured by structural fiscal and inflation risks [p.13][p.23]. Correlations between bonds and risky assets are flagged as regime‑dependent, with the potential for positive correlation when inflation/fiscal concerns dominate, reducing long‑end hedging effectiveness [p.13].
HSBC Outlook	Performance of financials and broader markets is linked more to curve shape than rate level, with the US (and even Europe) still showing a relatively steep curve that benefits banks [p.18]. The term premium on longer USTs is already incorporating US fiscal deficits, while a stable coupon supply and the end of QT in December are expected to support longer maturities and limit further yield downside [p.21–22].
JPAM Outlook	n.a.
JPM Outlook	U.S. long‑term rates are expected to remain range‑bound with modest curve steepening, with 2‑year Treasuries around 3.50%–3.75% and 10‑year Treasuries around 4.00%–4.50% through 2026, and investors advised to expect rate volatility and focus on active duration management rather than large directional bets [p.1][p.5].
MS - 2026 US Equities Outlook - The Rolling Recovery Is Here	Lower short‑end rates from rate cuts plus Fed support for front‑end funding (repos, potential front‑end net asset purchases) are expected to steepen the curve and improve bank NIMs and loan growth, favoring mid‑cap banks and small‑cap cyclicals [p.22, p.31]. The long end is described as “questionable” in how low it can go, given prior episodes where it rose sharply when the Fed cut (2022), with the bull case assuming a contained back end via Treasury buybacks, reduced long‑end issuance, and other tools, implicitly resulting in a steeper but capped curve [p.11, p.22–23].
KKR 2026 Outlook	Yield curves are expected to steepen as long‑end yields (around 4% U.S., 3% Euro Area) sit above policy rates but “do not become unglued,” supported by a stabilizing Fed balance sheet (~22% of GDP) and deficits around 6–7% of GDP [p.61–62, p.64–65]. Higher term premia and structurally higher neutral rates contribute to more volatile yields and a weaker hedging role for duration, with positive stock–bond correlations persisting across major markets [p.12, p.17, p.61, p.65, p.135].
RIC 2026 BAML	Preferred rate views are long belly, steeper curve, lower real rates, and low near‑term vol, with the curve expected to steepen as markets price a lower Fed cutting trough driven by growth‑slowdown risk and Fed‑independence concerns [p.17]. End‑2026 10y yields (e.g., UST 4.25%, Bund 2.75%) alongside additional Fed cuts imply some term‑premium resilience or re‑steepening relative to the front end, even amid global easing [p.2, p.19].
TRowe Outlook	Expansionary fiscal policy and structural labor‑market shifts are seen pushing long‑maturity DM yields higher, particularly in the U.S., where inflation risk and heavy issuance support a steeper curve and higher term premium [p.10–11]. U.S. investment‑grade markets are characterized by Fed cuts plus sticky inflation that give the curve a steepening bias, with persistent upward pressure on the long end of the Treasury curve, while lower inflation ex‑U.S. limits long‑end upside even as U.S. dynamics exert some pull [p.11, p.18].
Stifel Outlook	n.a.
UBS Year Ahead	Baseline US curve is mildly upward‑sloping into Dec 2026, with Fed funds around 3.5% and the 10‑year yield near 3.75%, while in a “Disruption” scenario aggressive cuts take the policy rate to 1.50% and the 10‑year to 2.50%, keeping the curve positively sloped but at much lower levels [p.48]. Rising debt and financial repression imply structurally suppressed term premia and more anchored yields than fundamentals suggest, with bond yields less responsive than FX to shocks [p.36–38].

Balance sheet and market interventions — QT/QE shifts, YCC, special tools (e.g., TPI)

Source	Content
Brookfield Outlook	n.a.
Goldman Outlook - Summary	n.a.
Barclays Outlook	Fed is halting balance sheet reduction and will reinvest all maturing Treasuries, BoE has already slowed QT and may slow further if market stability is threatened, and the ECB’s Transmission Protection Instrument (TPI) remains available for “persistent and unsustainable spread widening” [p.20]. Coordinated strategies with central banks buying longer maturities while treasuries issue shorter‑dated debt—an “operation twist with a twist”—are contemplated to contain supply‑driven stress in sovereign markets [p.20].
Blackrock Outlook	n.a.
Goldman Outlook	n.a.
HSBC Outlook	In the US, the planned end of the Fed’s QT in December is highlighted as a key support for longer‑dated Treasuries alongside steady issuance, suggesting reduced additional balance‑sheet‑driven upward pressure on long yields [p.22]. In China, the PBoC’s resumption of its bond purchase programme is cited as an accommodative step that underpins local‑currency debt valuations [p.23].
JPAM Outlook	n.a.
JPM Outlook	n.a.
MS - 2026 US Equities Outlook - The Rolling Recovery Is Here	QT has been ended earlier than expected on reserve‑adequacy and financial‑stability grounds, with the Fed reiterating readiness to supply liquidity via the Standing Repo Facility and intervene in funding markets as needed, effectively supporting front‑end financing and risk assets [p.11]. The outlook envisions potential net asset purchases at the front end into next year and frames these tools—alongside the near‑empty reverse repo facility, Treasury buybacks, and possibly stablecoin‑related mechanisms—as de facto debt monetization and part of a broader “run it hot”/financial‑repression regime [p.11, p.22–23].
KKR 2026 Outlook	Fed QT slows into a balance‑sheet plateau near 22% of GDP, with reserves growing roughly with nominal GDP and no new unconventional tools flagged, while this structural stance feeds into a ~4% long‑run 10‑year yield anchor [p.64–65, p.112]. ECB continues to remove excess liquidity (about €2.1 trillion already drained) and leans on further QT alongside a modest rate hike to withdraw accommodation without additional QE‑type interventions [p.65–66, p.116]. BoJ normalizes away from prior yield‑curve‑control settings via gradual policy‑rate hikes and ultra‑long JGB issuance in support of “Abe‑ism 2.0” [p.51–52, p.61, p.66–67].
RIC 2026 BAML	n.a.
TRowe Outlook	n.a.
Stifel Outlook	n.a.
UBS Year Ahead	High and rising G7 debt is expected to foster more frequent interventions that channel savings and central bank funds into government bonds, anchoring rates and suppressing yields (“financial repression”), while Fed, ECB, and BoJ balance sheets, having grown substantially over the past 20 years, are projected to remain high rather than undergoing large QT [p.36–38]. Policy regimes may move toward more fixed borrowing costs with currencies absorbing more of the adjustment, implicitly relying on ongoing or ad‑hoc QE‑style operations rather than pure market‑determined yields [p.37–38].

EM policy cycles & Fed spillovers — EM easing pace, USD/oil effects, relative opportunities

Source	Content
Brookfield Outlook	n.a.
Goldman Outlook - Summary	EM policy cycles are characterized by anticipated continued easing across several emerging markets, supported by a subdued US dollar and lower oil prices that reduce inflation risks and underpin a constructive stance on EM debt carry and alpha [p.14–15].
Barclays Outlook	n.a.
Blackrock Outlook	EM local‑currency easing has largely played out, as inflation fell, central banks cut rates, and EM FX strengthened against a softer dollar, with that “phase… ending” now that much of the early easing and currency strength is in the price [p.14]. A weaker dollar and lower U.S. rates are now seen as improving EM hard‑currency credit fundamentals, justifying an overweight, while EM local debt is kept neutral amid uncertainty over whether dollar weakness persists [p.14, p.16].
Goldman Outlook	EM central banks are expected to continue easing, supported by disinflation, Fed cuts, a subdued US dollar, and lower oil prices that reduce inflation risks and allow further rate reductions [p.6][p.24]. EM local and external debt are highlighted as beneficiaries of this easing cycle, with the softer USD/oil backdrop enhancing relative opportunities [p.8][p.25].
HSBC Outlook	Lower Fed rates create room for Asian central banks to cut further amid soft inflation and stable currencies, with EM policy rates still delivering unusually high real yields versus history [p.10, p.23]. Banxico is expected to continue cutting in response to economic deceleration and a focus on 2026 fiscal consolidation, SARB’s lower inflation target is seen as structurally lowering yields, and EM support is shifting from Fed‑driven (weak USD/Fed cuts) to local drivers as the Fed nears the end of its easing cycle [p.5, p.22–23].
JPAM Outlook	n.a.
JPM Outlook	In a backdrop of easier global monetary policy and a shallow Fed easing path, EM debt—especially local‑currency—“continues to offer attractive carry,” implying no major aggregate EM tightening risk and positioning EM as a relative opportunity in fixed income [p.5][p.8].
MS - 2026 US Equities Outlook - The Rolling Recovery Is Here	n.a.
KKR 2026 Outlook	Around 23% of EM central banks are already cutting policy rates, with “more room to run,” positioning EM ahead of DMs in the easing cycle and creating a tailwind for EM equities and credit [p.60, p.104–105]. Fed policy is expected to remain structurally higher but not excessively restrictive, with risks from tariffs and oil (via global inflation and USD dynamics) noted [p.27–28, p.37–38, p.60, p.67–69].
RIC 2026 BAML	2026 is described as “the year of easing in EM,” with a focus on income from EM debt and dividend stocks as multiple EM central banks, especially in LatAm, embark on significant cutting cycles [p.10]. LatAm is identified as the EM region with the most rate cuts to come, with Brazil expected to deliver the deepest easing cycle, underpinning constructive views on local assets [p.17]. A structurally weaker USD (DXY near 95 by end‑2026) is framed as part of a “Great Rebalance,” supportive for EM [p.3].
TRowe Outlook	EM inflation and debt are described as under control, leaving room for further rate cuts, though many countries are late in their easing cycles, which limits the remaining scope [p.4–5]. Higher long‑end U.S. yields and tariff uncertainty are key external headwinds, but anticipated Fed cuts in 2026 and a weaker U.S. dollar support EM local‑currency and hard‑currency debt, with EM sovereigns highlighted for attractive yields and residual easing capacity [p.15, p.18].
Stifel Outlook	n.a.
UBS Year Ahead	APAC ex‑Japan is expected to see a stronger finish to 2026 as lower interest rates take effect, with Fed easing contributing to a weaker USD into mid‑2026 and supporting regional growth and FX [p.23, p.42]. China’s stance emphasizes targeted fiscal and industrial policy rather than explicit rate moves [p.23, p.25, p.43].

Policy path and private‑sector financing — Borrowing costs, refinancing, deal activity into 2026

Source	Content
Brookfield Outlook	Lower borrowing costs from “additional interest‑rate cuts” and “prospective easing in interest rates” are expected to improve refinancing conditions, catalyze renewed mortgage‑market and housing activity, and “accelerate deal activity” across private equity, real estate, infrastructure debt, and asset‑based finance heading into 2026 [p.18, p.20, p.22, p.29–31]. The last several years are framed as a period of “elevated base rates and tightening financial conditions,” with easing and spread compression now supporting more plentiful capital and higher transaction volumes [p.28–31].
Goldman Outlook - Summary	n.a.
Barclays Outlook	Core developed rates are expected to trend modestly lower and to act as a “helpful diversifier from risk asset exposure in the event of a weaker economy,” supporting allocations to higher‑quality credit and medium duration [p.18, p.21, p.46]. Elevated government supply and only gradual policy easing imply that borrowing costs remain restrictive rather than returning to pre‑COVID lows, keeping a premium on careful selection across bond segments and timing against data‑driven repricing of forward curves [p.19–21, p.46].
Blackrock Outlook	Higher leverage to finance AI capex and already high public debt are expected to keep upward pressure on borrowing costs via higher term premia and greater credit issuance across public and private markets, even as policy rates are cut [p.4, p.7]. This implies a structurally higher cost of capital over the strategic (5+ year) horizon, with a more leveraged financial system vulnerable to shocks from bond‑yield spikes tied to policy tensions between inflation control and debt sustainability [p.4, p.7, p.15].
Goldman Outlook	n.a.
HSBC Outlook	Limited remaining Fed cuts and a relatively steep US curve imply borrowing costs will not fall as much as current market pricing suggests, particularly for sectors like financials whose performance is tightly linked to curve shape rather than the absolute rate level [p.5, p.18]. EM local‑currency debt and Asian IG bonds are positioned to benefit from ongoing local easing and still‑favourable global financial conditions, supporting financing conditions where political and fiscal stability hold [p.9, p.22–23, p.25].
JPAM Outlook	A “higher for longer but easing” policy backdrop underpins expectations that by 2026 debt yields will again fall below real estate cap rates, normalizing capital structures and supporting CRE dealmaking and private‑equity add‑on acquisitions, while still remaining above pre‑COVID lows so that returns depend more on income growth than leverage [p.7, 10–11]. In private credit and real estate debt, current high policy rates generate 5%–6.5% yields on low‑/moderate‑LTV CRE loans and 9%–10% on moderately levered loans, with ongoing Fed cuts likely to lower floating‑rate income but improve coverage ratios and reduce default risk into 2026, even as tight spreads may underprice late‑cycle credit risk [p.66–69, 71–72].
JPM Outlook	n.a.
MS - 2026 US Equities Outlook - The Rolling Recovery Is Here	Borrowing costs have risen toward 4% post‑hiking cycle, but the combination of lower front‑end rates from cuts and front‑end balance‑sheet support should ease financing conditions, particularly for small businesses, small caps, and mid‑cap banks that currently face “too restrictive” policy versus large firms and the government [p.10–11, p.22, p.31–32]. A steepening curve and looser credit standards (per Senior Loan Officer Survey) are expected to spur C&I loan growth and restart capex (especially industrial equipment), improving private‑sector financing into 2026 [p.31–34].
KKR 2026 Outlook	Structurally higher policy and long‑end rates (Fed neutral 3.375%, 10‑year U.S. ~4.25% in 2026) combined with positive stock–bond correlation imply higher and more volatile borrowing costs and weaker duration hedging for corporates and investors, including a surge in long‑end IG issuance to fund AI and capex [p.61–62, p.64–65, p.135]. EM rate‑cut cycles and persistently negative real rates in Japan provide relatively more supportive local financing backdrops [p.60, p.66–67, p.104–105].
RIC 2026 BAML	Lower policy rates and falling real bond yields are embedded in a bullish backdrop for risk assets—“78 global rate cuts + 9% EPS growth”—supporting easier financing conditions for corporates [p.1, p.17]. Credit strategists flag risks from AI‑related re‑leveraging and potential supply indigestion in leveraged finance, suggesting that while the easing cycle supports borrowing and issuance, there are growing risks of inflation, obsolescence, and credit stress that could affect deal activity [p.17].
TRowe Outlook	n.a.
Stifel Outlook	The projected move to a ~1% real Fed funds rate by end‑2026 implies a return to historically “normal” real borrowing costs, but financial conditions are already tightening via higher index readings even as equity valuations remain elevated, pointing to pressure on financing conditions [p.3, p.37]. Extremely tight IG credit spreads that imply implausibly strong (~4% y/y) real GDP are seen as vulnerable, with any growth disappointment likely to widen spreads and compress equity multiples, affecting corporate funding and risk appetite [p.30].
UBS Year Ahead	Moderate Fed and other DM rate cuts are seen as a key driver of medium‑duration quality bond outperformance over cash and lower borrowing costs, especially in aggressive‑cut scenarios where 10‑year yields fall sharply and IG bond returns rise to ~7% by 2026 [p.39–40, p.48].

Cross‑country policy divergence calls — Relative hawks/doves across Fed, ECB, BoE, BoJ

Source	Content
Brookfield Outlook	n.a.
Goldman Outlook - Summary	Global inflation and growth divergence is producing increasingly diverse central bank policies, with Fed and BoE biased toward easing (cuts in late 2025 and into 2026), ECB on prolonged hold, and BoJ as a hawkish outlier moving to hikes amid persistent above‑target inflation and robust growth [p.14]. Additional G10 divergence appears with Sweden likely ending easing, Norway continuing to ease, Australia potentially pausing cuts on inflation surprises, New Zealand cutting further on weak GDP, and Switzerland unlikely to return to negative rates, reinforcing a broad cross‑country divergence theme [p.14].
Barclays Outlook	Policy divergence is highlighted across the US, UK and eurozone: the Fed is modestly dovish but highly data‑ and politics‑dependent, the BoE has more room to surprise on the dovish side versus market pricing, and the ECB is “in a good place” at 2% but with risks skewed toward further cuts despite markets pricing stasis [p.10, p.18–19]. Focuses on relative hawk/dove dynamics among Fed, ECB and BoE as the main drivers of cross‑market rate and curve differences [p.18–19].
Blackrock Outlook	Fed is relatively dovish, with ongoing easing into 2026 underpinning risk assets [p.5, p.15], while BoJ is relatively hawkish/normalizing, with further rate hikes and heavy issuance lifting JGB yields [p.16]. ECB and BoE are more in‑line with market pricing, with euro govies and gilts held neutral and policy surprises not a central theme, whereas Japan and the U.S. represent the key divergence between continued easing and continued tightening, respectively [p.15–16].
Goldman Outlook	Policy divergence is central, with the Fed in a gradual easing mode, ECB relatively hawkish and likely on hold at 2% barring an inflation undershoot, BoE resuming cuts amid softer data, and BoJ as the standout hawk shifting further into a higher‑rate regime on persistent inflation and strong growth [p.6][p.11][p.23][p.24]. Other G10 show varied positions—New Zealand and Norway easing more, Sweden likely done easing, Australia at risk of pausing cuts if inflation surprises higher, and Switzerland very unlikely to return to negative rates—creating a broad G10 landscape of differing policy stances that supports cross‑market relative‑value trades [p.24].
HSBC Outlook	Fed is nearing the end of its cutting cycle and likely to ease less than markets expect, while the ECB is already in “early easing,” the BoE may turn more dovish if tax hikes hit UK growth, and the RBA stands out as relatively hawkish supported by strong Australian data [p.3, p.5, p.22, p.24].
JPAM Outlook	Divergent central‑bank policies are highlighted as a key macro theme, with Fed and ECB in easing mode toward mid‑2026 while the BoJ stands out as a late‑cycle outlier expected to hike slightly in 2026, creating tradable dislocations in rates, FX and commodities that benefit macro hedge funds [p.7, 11].
JPM Outlook	Policy divergence is addressed in broad strokes: Fed is portrayed as potentially more “patient” than markets anticipate, with rising U.S. inflation uncertainty and debt levels making other developed sovereign bonds useful diversifiers, while “easier global monetary policy” is expected elsewhere [p.5][p.8].
MS - 2026 US Equities Outlook - The Rolling Recovery Is Here	n.a.
KKR 2026 Outlook	Fed is modeled with a higher neutral and a temporarily dovish dip below neutral in 2026, making it structurally hawkish vs the post‑GFC era but more labor‑sensitive than in 2022, while ECB remains mildly accommodative through 2026 with only one further 25 bps hike in 2027, slightly more hawkish than consensus on the ultimate depo level [p.61–63, p.65–66]. BoJ appears relatively dovish in real‑rate terms—moving policy only gradually to 1.5% by 2027 and maintaining negative real rates—while PBoC and many EM central banks are already in or entering easing cycles [p.50–51, p.60, p.66–67, p.104–105].
RIC 2026 BAML	Policy divergence is framed within a “Great Rebalance”: the Fed is seen turning more dovish under a new Chair with additional cuts, European central banks are characterized as more dovish and driving real yields lower, while Japan allows 10y yields to rise toward 2.00% amid fiscal expansion, signaling gradual normalization rather than sharp tightening [p.3, p.17, p.19]. The USD is expected to weaken (DXY ~95) as this asynchronous easing and rebalancing process unfolds [p.3].
TRowe Outlook	Fed is portrayed as relatively hawkish and constrained, with fewer and later cuts than markets price, while ECB and BoE are deeper into easing cycles and likely to remain more dovish, including an additional potential ECB cut in March 2026 and more BoE easing than priced [p.3–5]. BoJ is the clear outlier on the hawkish side, having moved from deflation to inflation and expected to hike rates gradually and possibly more than anticipated, while EM central banks as a group are late‑cycle cutters; this divergence underpins an outlook for a weaker dollar as the Fed eventually eases while others are already far along [p.4–5, p.15].
Stifel Outlook	n.a.
UBS Year Ahead	Fed is modestly dovish (further cuts toward low‑3% rates) versus an on‑hold ECB at 2.00%, a relatively hawkish BoE that trims only twice and keeps rates high at 3.25%, and a still‑dovish but gradually normalizing BoJ hiking slowly from near‑zero to 1.00% by end‑2026 [p.22, p.42–43, p.60]. SNB remains the most dovish with a zero policy rate and no further cuts, reinforcing CHF as a low‑yield currency versus higher‑yielding USD, GBP, and EUR [p.42, p.60].

This site synthesizes publicly available 2026 outlook reports for informational purposes only. It is not investment advice. Views expressed are those of the original authors. No affiliation with or endorsement by the cited institutions is implied.