Fed cuts written off

Traders have largely stopped expecting the Federal Reserve to cut interest rates at its April 28-29 meeting and now see a hold instead. (federalreserve.gov) The shift followed a hotter March inflation report on April 10. The Consumer Price Index rose 0.9% from February and 3.3% from a year earlier, after a 21.2% jump in gasoline helped drive nearly three-quarters of the monthly increase. (bls.gov) Under the surface, inflation looked less severe than the headline number. Core consumer prices, which exclude food and energy, rose 0.2% in March and 2.6% from a year earlier, while energy prices were the main shock tied to the Iran conflict. (cnbc.com) The Federal Reserve left its benchmark rate unchanged at 3.5% to 3.75% on March 18. In that statement, policymakers said inflation was “somewhat elevated” and said the economic effects of developments in the Middle East were uncertain. (federalreserve.gov) That means investors are heading into the next meeting with a narrower question than they had a week ago. Instead of asking whether Chair Jerome Powell might start easing in April, markets are asking whether the central bank will wait for lower inflation and calmer oil prices first. (kitco.com) The market gauge most traders use for these bets is the CME FedWatch tool, which translates prices in federal funds futures into implied odds for each Federal Open Market Committee meeting. CME says the tool is based on 30-Day Fed Funds futures prices. (cmegroup.com) The April meeting is still nearly two weeks away, and the Fed has not signaled any emergency move before then. The Board’s calendar shows the two-day meeting begins April 28, with the policy statement due at 2 p.m. Eastern time on April 29 and Powell’s press conference set for 2:30 p.m. (federalreserve.gov) Officials’ own projections in March still pointed to one rate cut later in 2026, not necessarily in April. Reuters reported on April 6 that Wells Fargo Investment Institute had dropped its expectation for any 2026 cuts because of inflation uncertainty and Middle East risks, showing how quickly private forecasts have shifted. (reuters.com) For now, the Fed is stuck between a soft labor market and an inflation spike tied to energy. Unless the next two weeks bring cooler price data or a clearer drop in oil risk, April looks more like a pause than the start of rate cuts. (federalreserve.gov)