Russell Investments: The Federal Reserve will implement a hawkish 25 basis point rate cut in December, with the final interest rate projected to be 3.25% to 3.5% by 2026.

Paul Eitelman, Senior Director and Chief Investment Strategist for North America at Russell Investments, said the Federal Reserve's interest rate decision this week will be a tough one, given the rare combination of robust economic growth and weak job growth. Russell Investments expects the Fed to implement a hawkish 25-basis-point rate cut and remain cautious in its wording regarding the future direction of interest rates. Eitelman predicts the Fed may slow or halt its easing cycle in early 2026, with the terminal interest rate expected to be between 3.25% and 3.5%. Furthermore, he noted that the current 10-year Treasury yield is 4.1%, higher than fair value estimates, and recommends a strategic allocation to duration risk in portfolios.