Fed cuts pushed back
- A Reuters poll found economists now expect the Federal Reserve to wait at least six months before cutting rates. - The median forecast moved the first rate cut to the fourth quarter of 2026, not earlier this year. - Markets are pricing much lower odds of near-term easing as war-related energy shocks keep inflation elevated (reuters.com).
Economists now expect the Federal Reserve to wait until late 2026 before cutting interest rates, a sharp shift from forecasts for earlier relief this year. (reuters.com) A Reuters poll published April 22 found the median forecast for the first cut moved to the fourth quarter of 2026. The poll said war-driven energy shocks have kept inflation high enough to delay easing by at least six months. (reuters.com) The Fed’s benchmark rate is currently 3.50% to 3.75%, where policymakers left it on March 18. In that statement, the Federal Open Market Committee said it would judge any further moves by incoming data, the outlook, and the balance of risks. (federalreserve.gov) The inflation problem is straightforward: higher oil and gasoline prices feed into household bills and business costs. The Bureau of Labor Statistics said the energy index jumped 10.9% in March, led by a 21.2% surge in gasoline that accounted for nearly three-quarters of the monthly increase in consumer prices. (bls.gov) That left March consumer inflation at 3.3% from a year earlier, still well above the Fed’s 2% target. Core prices, which strip out food and energy, rose 0.2% in March, but the headline number is what households see first at the pump. (bls.gov; cnbc.com) Financial markets have moved the same way. CME FedWatch says traders use fed funds futures to price the odds of upcoming rate moves, and Reuters reported that near-term cut expectations have largely been wiped out. (cmegroup.com; reuters.com) Fed officials had already turned more cautious in March. The Fed’s latest quarterly projections showed policymakers still expected inflation, unemployment, and growth outcomes for 2026 through 2028 to remain uncertain enough to keep policy restrictive for longer. (federalreserve.gov) Households are showing the strain. The University of Michigan said consumer sentiment fell about 11% in April, and CNBC reported the preliminary reading dropped to 47.6, the lowest on record. (sca.isr.umich.edu; cnbc.com) For borrowers, the practical effect is simple: lower rates on mortgages, credit cards, and business loans may take longer to arrive than many expected at the start of 2026. For the Fed, the next few inflation reports now matter more than the old assumption that cuts were just around the corner. (reuters.com; federalreserve.gov)
