For much of 2025, advisors, experts, and investors spent months speculating about when the Federal Reserve would begin trimming interest rates in earnest. Now that rate cuts are back on the table, 2026 is shaping up to be a different picture entirely. The board headed into the end of the year with a few recent rate cuts already under its belt. Furthermore, several board members are slated to change seats, which could shift the pace of rate cuts.
Towards the end of 2025, the team at BNY Investments released their 2026 outlook. As part of the outlook, Vincent Reinhart, Chief Economist at BNY Investments Dreyfus & Mellon, examined the state of play for central banks and what could come as the year progresses.
In the outlook, Reinhart noted expectations for the Fed to have “a stronger bias toward monetary easing.” According to Reinhart, if the Fed aligns closer with the U.S. government, it may put the Fed at odds with other central banks across the globe. This may lead to further pressure being placed on the dollar.
In Europe, Reinhardt expected the ECB to potentially ease rates a bit. However, the extent of the easing may be limited by Europe’s fiscal stimulus for its defense sector.
The Bank of Canada, according to Reinhardt, may follow a similar direction to the Fed, though he adds this would be done so “reluctantly and incompletely.” Meanwhile, Reinhart noted that the Bank of Japan “is likely to firm its policy rate” while the government navigates a complicated transition process.
BEDY Blends Income and Equity Exposure
With the dollar looking particularly weak, it may be time to take your cash off the sidelines and put it to work. One way to do so is through an active equity income strategy, such as the BNY Enhanced Dividend and Income ETF (BEDY).
BEDY seeks to build a blend of capital appreciation and income through its investment approach. The fund uses computer modeling techniques, fundamental analysis, and risk management to build a portfolio of stocks with a focus on value.
Up to 10% of BEDY’s net assets may also be allocated to equity-linked notes. Not only do these products provide diversification, but they also offer the potential for long-term income.
BEDY’s approach to equity exposure has already paid off on a total return basis. As of December 31, 2025, the fund’s NAV has risen 18.24% year-to-date.
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