Institution: The Federal Reserve has limited room to cut rates in a "stagflation-like" environment, and any rate cut is likely to be delayed until the second half of the year

**March 19 CF40 Research Report** The Federal Reserve held interest rates steady at its March meeting, matching market expectations. Its dot plot and economic projections showed upward revisions to inflation expectations and reduced scope for rate cuts, with policy overall tilting toward caution. While Fed Chair Powell noted significant uncertainty from oil price shocks and the economy’s remaining resilience, CF40 argues the actual picture is more complex. Tariffs and immigration policies have already constrained supply, and combined with oil price shocks, the U.S. economy is entering a stagflation-like phase. Meanwhile, private credit risks are emerging, and financial conditions could tighten on their own. In this context, the Fed faces short-term constraints from sticky inflation (likely holding steady now) and medium-term pressure to pivot toward rate cuts passively if demand weakens or financial risks escalate. CF40 expects the Fed to hold rates steady in H1, delaying resumed rate cuts until H2. However, if cuts are a passive response to worsening economic or financial conditions, they will be unlikely to boost market risk sentiment.