Fed cuts pushed to late 2026

Economists now expect the Federal Reserve to wait until late 2026 before cutting rates, a sharp pushback from forecasts that only weeks ago still pointed to a move by midyear. (usnews.com) In a Reuters poll conducted April 17-21, 56 of 103 economists said the Fed’s benchmark rate would still be in the 3.50% to 3.75% range at the end of September. In late March, nearly 70% had expected at least one cut by then. (usnews.com) The shift followed a nearly two-month war in the Middle East that Reuters said had pushed fuel prices higher, hit consumer confidence, and erased market bets on near-term easing. Reuters reported that 71 economists still expect at least one cut this year, but nearly a third now see no change at all in 2026. (usnews.com) The Fed sets a short-term benchmark that flows through to credit cards, business loans, auto loans, and mortgages. When officials keep that rate high to slow inflation, borrowing across the economy usually stays expensive for longer. (federalreserve.gov) At its March 17-18 meeting, the Federal Open Market Committee held rates at 3.50% to 3.75% and said inflation remained “somewhat elevated.” Its March projections showed a median federal funds rate of 3.4% at the end of 2026, the same as in December. (federalreserve.gov, (federalreserve.gov) Inflation’s latest jolt came from energy. The Bureau of Labor Statistics said the energy index rose 10.9% in March, led by a 21.2% jump in gasoline prices that accounted for nearly three quarters of the monthly increase in the overall consumer price index. (bls.gov) Households have noticed. The University of Michigan said consumer sentiment fell about 11% in April, and Reuters reported the preliminary index dropped to a record low of 47.6 from 53.3 in March. (sca.isr.umich.edu, (detroitnews.com) Higher-for-longer policy also keeps pressure on housing finance. Freddie Mac said the average 30-year fixed mortgage rate was 6.30% as of April 16, down from 6.37% a week earlier but still well above levels that would make buying materially cheaper for many households. (freddiemac.com) Morgan Stanley’s Michael Gapen told Reuters he still expects the Fed to ease later this year because oil is pushing up headline inflation more than core inflation, which strips out food and energy. He also said the main risk is that inflation does not cool enough and the Fed stays on hold. (usnews.com) For now, the rate-cut clock has moved from summer to the far end of the year. Until inflation and energy prices cool, the Fed’s message is still wait. (usnews.com)