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.