The Federal Reserve's rate-cutting cycle faces major headwinds as the proposed One Big Beautiful Bill Act of 2025 could inject $100 billion into the economy, according to RSM economist Joe Nguyen. The firm now expects just two rate cuts in 2026, down from earlier projections, with both likely delayed to later in the year.
"Whenever you have that kind of money being injected into the economy, you're going to see higher GDP growth, but at the same time higher inflation," Nguyen said. "For the short run, we think that especially for January and March, the bar for another rate cut is much higher than it was in 2025."
The timing creates uncertainty for markets as Fed Chair Jerome Powell's term expires in May 2026. Central banks globally are receiving mixed signals: UK inflation declined to 2.5% in January, a 10-month low, while labor markets show persistent slack.
Corporate earnings reveal how businesses are navigating this policy fog. Danske Bank reported DKK 23.0 billion in net profit for 2025 and announced a dividend of DKK 16.94 per share. Chief Economist Las Olsen noted "prospects for increased demand in 2026, alongside stabilised inflation and interest rates" in Denmark and key export markets.
BAE Systems and Glencore also posted resilient results, though tariff concerns and policy uncertainty are dampening long-term growth outlooks across sectors. The divergence between current corporate performance and future projections reflects broader market anxiety about monetary policy direction.
Lower-income households face disproportionate pressure from this environment. McDonald's reported losing low-income customers, with Marisa DiNatale of Moody's Analytics noting that "economic and policy headwinds are disproportionately affecting lower-income households."
For investors and corporate finance teams, the message is clear: expect rates to stay higher for longer. The combination of fiscal stimulus and inflation risks means the easy money era remains firmly in the past, with implications for refinancing costs, capital allocation, and valuation multiples across asset classes.