Fed still expects a rate cut

Federal Reserve officials spent their March 17–18 meeting holding rates steady at 3.5% to 3.75%, but the minutes released on April 8 show they still thought a rate cut later in 2026 was likely. The surprise was that they were talking about cutting and hiking in the same document because the Iran war had scrambled the inflation outlook. (federalreserve.gov 1) (federalreserve.gov 2) (cnbc.com) The Federal Reserve is the United States central bank, and its main rate is the price banks charge each other for overnight money. When that price stays high, mortgages, car loans, and business credit usually stay expensive too. (federalreserve.gov 1) (federalreserve.gov 2) In March, the committee’s median forecast still pointed to one cut this year. The new projection put the federal funds rate at 3.4% at the end of 2026, down from the current 3.5% to 3.75% range, which is basically one quarter-point move. (federalreserve.gov 1) (federalreserve.gov 2) The reason they did not cut in March is that inflation is still above target. Chair Jerome Powell said total personal consumption expenditures inflation was 2.8% over the 12 months through February, while core inflation, which strips out food and energy, was 3.0%, both above the Federal Reserve’s 2% goal. (federalreserve.gov) Then oil got dragged into the picture. Powell said near-term inflation expectations had risen in recent weeks, likely because supply disruptions in the Middle East pushed oil prices higher, and the minutes said officials wanted to stay “nimble” while they watched that shock move through the economy. (federalreserve.gov) (cnbc.com) That creates the Federal Reserve’s problem in plain English: higher gasoline prices can act like a tax on households, but they can also lift inflation. If families spend more at the pump and less everywhere else, growth and hiring can weaken even while headline prices look hotter. (cnbc.com) (federalreserve.gov) The labor market already looked softer than it did a year ago. Powell said unemployment was 4.4% in February and job gains had remained low, which helps explain why “many participants” still thought lower rates would probably be appropriate if inflation kept easing. (federalreserve.gov) (cnbc.com) At the same time, the minutes show some officials were open to the opposite move. CNBC reported that policymakers also discussed the risk that Middle East hostilities could keep inflation elevated long enough to require rate hikes instead of cuts. (cnbc.com) The committee’s own forecasts show how narrow that path is. In March, officials marked 2026 economic growth at 2.4%, unemployment at 4.4%, and personal consumption expenditures inflation at 2.7%, which is a picture of decent growth with inflation still not fully beaten. (federalreserve.gov) So the message from these minutes is not “cuts are coming soon.” The message is that the Federal Reserve still sees one cut as the most likely destination for 2026, but every jump in oil, every inflation reading, and every weak jobs report can still change the route. (federalreserve.gov) (cnbc.com)