Fed delays rate-cut hopes

Economists in a new Reuters poll now expect the Federal Reserve to wait until late 2026 before cutting interest rates. (reuters.com) The poll, published April 22, said the Fed is likely to hold for at least six more months as war-driven energy costs keep inflation elevated. Reuters reported the shift followed a nearly two-month war in the Middle East that sent fuel prices higher and erased market pricing for near-term cuts. (reuters.com) At its March 17-18 meeting, the Federal Open Market Committee left the federal funds target range unchanged at 3.50% to 3.75%. The Federal Reserve’s March 18 implementation note said the interest rate paid on reserve balances stayed at 3.65%, effective March 19. (federalreserve.gov) The federal funds rate is the benchmark for borrowing across the economy, shaping costs for mortgages, credit cards, car loans and business debt. When the Fed keeps that rate high, it is trying to slow spending enough to bring inflation back toward its 2% goal. (federalreserve.gov) That makes energy prices unusually important right now. Oil and gasoline feed into household budgets directly, and they can also raise shipping, manufacturing and airline costs, making it harder for inflation to cool even if other prices ease. (federalreserve.gov) The change is notable because forecasts were less hawkish a month ago. In a Reuters poll conducted March 20-25, most economists still expected the Fed to cut later in 2026, rejecting more aggressive market bets at the time. (reuters.com) Fed Chair Jerome Powell said after the March meeting that the economy was still in solid shape even with inflation running above target and uncertainty elevated. CNBC reported the March decision was 11-1, with Governor Stephen Miran dissenting in favor of a quarter-point cut. (cnbc.com) For households and companies waiting for cheaper borrowing, the message from the latest poll is narrower than a promise of no cuts at all. It is that the first move now looks farther away, and the Fed is still being pulled more by inflation risks than by pressure to support growth. (reuters.com)