B orrowing costs for mortgages, auto loans, and credit cards will rise if the Federal Reserve raises its benchmark rate from the current level of 3.5% to 3.75%.
Related Brief 18h ago
monetary policy Oil Price Spikes Establish a Higher-for-Longer Interest Rate Floor
Borrowing costs will remain elevated for longer. The Federal Reserve maintained its benchmark interest rate at 3.5% to 3.75% during its March 18 policy meeting. The Federal Reserve's 2% inflation target remains a distant goal. Chair Jerome Powell cited inflation concerns and uncertainty from the war in the Iran war. Brent crude oil prices rose nearly 6% to around $105 a barrel, following geopolitical conflicts in the Middle East that had briefly pushed prices above $85 a barrel. March headline inflation is projected to rise 0.9% month-over-year, the largest jump since June 2022, reaching 3.4% year-over-year. Borrowing costs will remain elevated costs for longer.
This possibility is being considered by policymakers, including Chicago Fed President Austan Goolsbee and Cleveland Fed President Loretta Hammack. Minutes from a late January meeting revealed several of the 19 officials on the rate-setting committee supported the possibility of "upward adjustments" to rates.
Related Brief 2d ago
inflation March inflation surge set to cost consumers $8.4 billion in fuel as energy shock ripples through economy
Consumers have already paid $8.4 billion in extra fuel costs since the Iran war began, a surge that will register Friday as the sharpest monthly inflation spike since 2022. The March Consumer Price Index is forecast to rise 0.9 percent month over month, pushing annual headline inflation to 3.3 percent, driven by a 10.6 percent jump in energy prices. Gasoline now averages over $4 a gallon nationwide, a direct result of disrupted oil flows through the Strait of Hormuz, the world’s most critical petroleum corridor. This is not a typical energy blip: the U.S. has seen the largest one-month fuel cost increase since at least 1957. The shock is rippling beyond the pump. Transportation, food distribution, and manufacturing costs are rising, pushing core CPI up 0.3 percent for the month and 2.7 percent year over year. That keeps the Federal Reserve on hold. Markets assign a 98.4 percent probability to no change at the April 29 meeting, with rates expected to remain at 3.50–3.75 percent. Just months ago, the Fed projected one rate cut in 2026. Now, economists have erased that expectation. Some Fed officials have even flagged potential hikes if inflation accelerates further. Oxford Economics forecasts headline inflation will climb above 4 percent in April—despite a temporary ceasefire. The war hasn’t just moved oil. It has repriced the cost of moving everything.
The shift follows the start of the Iran war on Feb. 28, which sent global energy prices sharply higher. Nationwide gas prices averaged $4.12 a gallon on Monday, up 80 cents from a month earlier.
Related Brief 2d ago
monetary policy Stubborn PCE Inflation Increases the Likelihood of Federal Reserve Rate Hikes
Borrowing costs for consumers and businesses may increase. This potential rise in costs follows a growing consensus among Federal Reserve policymakers that interest rate hikes may be necessary to counter inflation. The Federal Open Market Committee held the federal funds rate at a target range of 3.50% to 3.75% in March, but progress toward the 2% inflation target is slower than expected. The personal consumption expenditures price index climbed 0.4% in February, and PCE inflation advanced 2.8% in the 12 months through February. Cleveland Fed estimates show inflation could rise to 3.5% in April, which would be the highest reading since 2024. Federal Reserve Bank of Cleveland president Beth Hammack stated that a hike is necessary to curb inflation if it remains elevated above the 2% target.
Economists surveyed by FactSet forecast annual inflation to jump to 3.1% from 2.4% in February. Monthly consumer prices are expected to rise 0.8% in March, while Cleveland Fed estimates show inflation could reach 3.5% in April.
Related Brief 3d ago
commodities Gold Holds Steady as Rate Hikes Loom and Geopolitics Simmer
Gold trades at $4,715.45 per ounce, unchanged Thursday, as investors weigh the risk of renewed Middle East conflict against growing expectations that the Federal Reserve will raise interest rates. Since hostilities erupted on February 28, spot gold has fallen over 10%, erasing gains driven by early escalation fears. Recent Israeli military strikes in Lebanon — which resulted in hundreds of fatalities — have heightened regional tensions, while Iran has threatened retaliation and the U.S. maintains a military presence under a fragile ceasefire. Despite the volatility, gold’s price response has been muted. Federal Reserve minutes from the March 17–18 meeting reveal increasing consensus among officials to consider rate hikes, a move that pressures non-yielding assets like gold. With inflation still above the Fed’s 2% target, upcoming PCE data Thursday and CPI figures Friday will shape expectations for monetary policy. Higher rates make alternative assets more attractive, dampening gold demand. Yet Standard Chartered projects a recovery in coming months, citing persistent geopolitical instability as a structural support for prices.
Inflation has run above the Fed's 2% target for more than five years. If inflation stays persistently above this target, the Fed may raise rates to tame it.
Related Brief 18h ago
interest rates Markets drop on Fed pause as oil and inflation defy cooling
The Dow Jones Industrial Average fell nearly 800 points, or 1.6%, after the Federal Reserve left interest rates unchanged on March 18, 2024, citing uncertainty from the war in Iran and ongoing inflation pressures. The S&P 500 dropped 1.4%, reaching its lowest level since November, while the Nasdaq Composite declined 1.5%. Wall Street’s “fear gauge,” the VIX Composite, spiked nearly 10%. The Fed’s decision not to raise rates came despite a hotter-than-expected reading on wholesale price inflation. Investors responded by selling bonds, pushing the yield on the 10-year U.S. note up to about 4.26%, a rise of nearly 6 basis points. Bond yields move inversely to prices. Oil prices added to inflation concerns, with Brent crude rising nearly 6% to around $105 a barrel. That kept the nationwide average for a gallon of gas at $3.86, according to GasBuddy’s tracker. Fed Chair Jerome Powell pointed to geopolitical uncertainty as a key reason for the central bank’s cautious stance.
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