Oil shocks and inflation are pushing Federal Reserve rate cuts into 2027

One predicted Federal Reserve interest rate cut may be pushed into 2027. This delay is the result of a causal chain starting with a six-week war in the Middle East and the closure of the Strait of Hormuz, which hit oil supplies. Oil futures hit a record high of more than $144 a barrel, while gasoline prices rose over $4 a gallon. These shocks caused the biggest monthly jump in inflation since 2022 and pushed consumer sentiment to its lowest level on record. Rising consumer prices now threaten to tie the central bank's hands, making it likely the Federal Reserve will remain firmly on hold. This has delayed the timetable for the Fed to return to a neutral rate of around 3% from its current range of 3.5% to 3.75%. One predicted rate cut may be pushed into 2027.