Fed cuts pushed back
- Economists now expect the Federal Reserve to delay rate cuts after war-driven energy shocks raised inflation risks. - A Reuters poll found many forecasters pushed expected cuts out at least six months, with a split in views. - Traders lowered the odds of a December cut and markets adjusted to higher-for-longer rates, per Reuters and FXStreet. ( )
Economists have pushed their expected Federal Reserve rate cut back by at least six months as war-driven energy shocks lift inflation risks again. (reuters.com) (aol.com) A Reuters poll published April 22 found the Fed is now expected to wait at least six months before cutting rates this year, after nearly two months of Middle East war sent fuel prices higher. The same report said forecasters were split, with many still expecting at least one cut and others shifting the first move much later. (reuters.com) (usnews.com) The Federal Reserve’s benchmark rate is currently 3.50% to 3.75%, unchanged since the March 18 meeting. In that statement, policymakers said they would judge any future move by incoming data, the outlook, and the balance of risks. (federalreserve.gov) Rate cuts usually lower borrowing costs for mortgages, car loans, and business debt, so the timing matters far beyond Wall Street. When oil and gasoline prices rise, the Fed worries that inflation will stay above its 2% target, making a cut harder to justify. (federalreserve.gov 1) (federalreserve.gov 2) The shift in expectations has shown up in markets as well as economist surveys. FXStreet reported on April 22 that fading Fed cut bets and elevated oil prices helped keep the U.S. Dollar Index near weekly highs. (fxstreet.com) Traders also marked down the odds of a December cut. A market report citing CME FedWatch data said the chance of a 25-basis-point cut in December fell to 49.6%, down from 62.9% a day earlier and 69.6% a week earlier. (msn.com) (cmegroup.com) Households are already showing strain from the same price shock. The University of Michigan’s preliminary April 2026 survey said consumer sentiment sank about 11% in the month, with respondents citing high prices and weaker asset values. (umich.edu) Fed officials have not committed to a new timetable, and some forecasters still see one cut before year-end. For now, the center of gravity has moved from “cuts soon” to “rates higher for longer,” with the next Federal Open Market Committee decision due on April 29, 2026. (federalreserve.gov) (reuters.com)
