Thomas Garretson, senior portfolio strategist at RBC Wealth Management, warned on July 10 that the Fed is likely to reverse its 2025 rate cuts entirely. His forecast calls for either three rate hikes or a prolonged hold at current levels, effectively erasing the easing that markets had treated as a safety net.
The Fed’s quiet pivot
At the June 17 FOMC meeting, the Fed unanimously held its benchmark rate steady at 3.5% to 3.75%. What caught attention was the updated dot plot: the median projection for the federal funds rate by year-end 2026 jumped to 3.8%, up from 3.4% in March.
Garretson described the 2025 rate cuts as “insurance cuts,” precautionary moves designed to cushion the economy against downside risks that never fully materialized. With those risks fading and new inflationary pressures emerging, the insurance policy is getting canceled.
Markets currently assign roughly 78-79% probability that rates won’t change at the upcoming July meeting. But Garretson’s concern isn’t about next month. If three hikes materialize over the next several quarters, the federal funds rate could climb back toward 4.5% or higher. Garretson’s view is that markets are being too optimistic. Current pricing reflects only one hike in 2026.
