Fed warning: cuts may wait

Austan Goolsbee said on April 14 that Federal Reserve rate cuts could slip into 2027 if the Iran war keeps oil prices high and inflation stuck above target. (wtaq.com) Goolsbee, who leads the Federal Reserve Bank of Chicago, said at the Semafor World Economy conference in Washington that the timing depends on how long oil stays elevated. He told the Associated Press the Fed’s job is to get inflation back to 2 percent. (money.usnews.com) Before the Iran war, Goolsbee said he expected tariff-driven inflation to fade this year and leave room for multiple rate cuts in 2026. He said a longer stretch of high inflation would push that timetable out of 2026. (finance.yahoo.com) The Federal Reserve sets a short-term benchmark called the federal funds rate, which influences borrowing costs across mortgages, credit cards, car loans and business debt. When inflation runs too hot, policymakers usually keep that rate higher to slow spending and price increases. (federalreserve.gov) At its March 18 meeting, the Federal Open Market Committee left that benchmark unchanged at 3.50 percent to 3.75 percent. The committee said it would judge any future move by incoming data, the outlook and the balance of risks. (federalreserve.gov) Inflation moved the wrong way in the latest government report. The Consumer Price Index rose 0.9 percent in March and 3.3 percent from a year earlier, while the core index that strips out food and energy rose 2.6 percent over 12 months. (bls.gov) Oil matters because it feeds into gasoline, shipping, air travel, plastics and other costs that spread through the economy. Goolsbee said on April 7 that the Iran war could lift inflation even as it slows growth, a mix central bankers call stagflation. (money.usnews.com) That warning marked a sharper turn from the Federal Reserve’s March projections, which still pointed to one rate cut in 2026. Outside analysts said the March meeting also raised the Fed’s 2026 inflation forecast to 2.7 percent from 2.5 percent. (wellsfargoadvisors.com) Goolsbee did not say cuts are off the table; he said the path depends on whether inflation resumes falling toward 2 percent. For borrowers and investors, that leaves the same question hanging over the rest of 2026: whether oil prices cool fast enough for the Fed to move. (wtaq.com)