Markets ditch near‑term Fed cuts

Investors have largely stopped betting on a near-term Federal Reserve rate cut as oil-driven inflation fears push Treasury yields and money-market pricing higher. (cmegroup.com) (bloomberg.com) The shift followed a run-up in crude after the Iran conflict and the collapse of talks, which pushed bond markets back toward a “higher for longer” view on interest rates. Bloomberg reported on April 13 that investors in the $31 trillion Treasury market were refocusing on the risk that energy costs could keep inflation elevated and delay Federal Reserve cuts. (bloomberg.com) That repricing comes even though Federal Reserve officials, in their March 17-18 projections, still showed a median expectation for one quarter-point cut in 2026. The central bank left its target rate at 3.50% to 3.75% at that meeting and said future moves would depend on incoming data. (federalreserve.gov) (reutersconnect.com) Bond traders had already started trimming rate-cut bets after March inflation data showed the Iran war feeding through to gasoline prices. Bloomberg reported on April 10 that traders were still clinging to one cut this year, but with far less conviction after the inflation report. (bloomberg.com) Higher market rates are already showing up in housing. The National Association of Realtors said on April 13 that existing-home sales fell 3.6% in March to a seasonally adjusted annual rate of 3.98 million, the slowest pace since June 2025. (nar.realtor) Sales were down 1.0% from a year earlier, while the median existing-home price rose 1.4% to $408,800 and inventory increased to 1.36 million homes, or 4.1 months of supply. National Association of Realtors Chief Economist Lawrence Yun said lower consumer confidence and softer job growth were holding buyers back. (nar.realtor) The housing figures matter because mortgage rates tend to track longer-term Treasury yields more than the Federal Reserve’s policy rate itself. When Treasury yields rise on inflation fears, borrowing costs for homebuyers can stay high even before the central bank makes any new decision. (cmegroup.com) (reuters.com) Yun said rising mortgage rates forced the trade group to cut its 2026 forecast for existing-home sales growth to 4% and to lower its outlook for new-home sales to flat. He kept the forecast for median home-price growth at 4% this year because inventory is still limited. (nar.realtor) The next test comes at the Federal Reserve’s next meeting, which CME FedWatch says is weeks away, with traders watching whether oil prices cool, inflation eases, or yields keep climbing. Until one of those moves breaks, markets are trading as if rate cuts can wait. (cmegroup.com) (blackrock.com)