「Fed's Bullhorn」: Rate Cut Prospects Dimmed Regardless of Ceasefire

April 9, Nick Timiraos—known as the "Fed’s megaphone"—noted that expectations for Fed rate cuts are fading fast, and shifts in the Middle East situation are no longer a key factor. The latest minutes from the Federal Open Market Committee (FOMC) show that amid stable inflation and a robust labor market, the Fed held its benchmark interest rate steady in the 3.5%-3.75% range, signaling a more cautious policy approach. Most officials see that the effects of tariffs, energy price pass-through, and rising inflation expectations could slow the pace of inflation’s decline more than anticipated. The analysis notes that even a ceasefire may not prompt rate cuts. Conversely, reduced tensions could ease downside economic risks, draw more attention to inflation, and extend the period of elevated interest rates. Fed Chair Jerome Powell also warned that the Fed is currently grappling with multiple overlapping supply shocks, and there is a risk of unanchored inflation expectations. Some officials have signaled that if inflation stays persistently above the Fed’s target, they may not rule out revisiting rate hikes. Overall, market optimism about rate cuts this year is fading, and the timeline for a Fed policy shift is being pushed further back.