Fed rate cuts pushed back

Economists now expect the Federal Reserve to keep rates higher for longer, with the first cut pushed back at least six months as oil-driven inflation flares again. (usnews.com) A Reuters poll conducted April 17-21 found 56 of 103 economists expect the Fed’s benchmark rate to stay in a 3.50% to 3.75% range through the end of September. In late March, nearly 70% had expected at least one cut by then. (usnews.com; federalreserve.gov) The same poll still showed 71 economists looking for at least one cut by the end of 2026, but nearly a third now expect no move this year. Reuters said the shift followed a nearly two-month Middle East war that sent fuel prices higher and knocked consumer confidence to a record low. (usnews.com) The Fed controls a short-term benchmark that feeds through to business loans, mortgages and bond markets. When cuts get delayed, companies refinancing debt, funding acquisitions or building large projects face a longer stretch of higher borrowing costs. (federalreserve.gov; atlantafed.org) That is a change from the Fed’s own March 17-18 projections, which still showed a median year-end 2026 federal funds rate of 3.4%, implying one quarter-point cut from today’s range. The March projections also put 2026 median core PCE inflation at 2.5%, still above the Fed’s 2% target. (federalreserve.gov; federalreserve.gov) Markets have also pared back easing bets. CME FedWatch says its probabilities are derived from 30-day federal funds futures, and the Atlanta Fed’s Market Probability Tracker shows daily market-implied paths based on options tied to the Secured Overnight Financing Rate. (cmegroup.com; atlantafed.org) Some economists still expect the Fed to cut later this year if oil stays contained and broader inflation cools. Michael Gapen of Morgan Stanley told Reuters his base case is that oil lifts headline inflation without spilling over into core inflation, which would leave room to ease later in 2026. (usnews.com) For now, the policy rate remains at 3.50% to 3.75%, and the next Federal Open Market Committee meeting is less than a week away. The question is no longer whether cuts were once expected by midyear, but how long the Fed will wait for the oil shock to fade. (federalreserve.gov; cmegroup.com)