Markets are rethinking the Fed’s path after its latest cut and a split 2026 outlook. Here’s how to track shifting rate expectations and what it could mean for savings.

The Federal Reserve concluded its last meeting of the year with a widely anticipated 25 basis point cut to the federal funds rate (FFR), bringing it to a range of 3.50-3.75%.

The federal funds rate can impact a host of borrowing costs, and thus the entire U.S. economy.

Wall Street strategists are generally pretty optimistic about the prospects for stocks in 2026. But this sunny outlook is very much dependent on the Federal Reserve's monetary policy maneuverings, as Deutsche Bank's Jim Reid pointed out in commentary shared with MarketWatch on Tuesday.

Federal Reserve policymakers cut interest rates by 25 basis points for the third straight meeting, though their dot plot projections suggest only one interest rate cut expected in 2026.

DBS Analysts believe that the market participants interpret the projection as a vote of confidence: the Fed sees the economy navigating through 2026 without significant overheating or recession. Unlike earlier cycles where rate cuts telegraphed alarm, the current trajectory telegraphs controlled normalization.