T he next two CPI reports will determine whether the September 2026 rate cut remains plausible or is fully priced out by markets.
Related Brief 1d ago
inflation Inflation’s Break Above 3% Could Force the Fed to Hike Rates—And That’s Bad for Stocks
The core Personal Consumption Expenditures Price Index (PCE) rose for two consecutive months, reaching an annualized rate of 3.1%. The core PCE has not broken above 3% on an upward trend since April 2021. Persistent inflation above 3% could force the Federal Reserve to raise interest rates instead of continuing rate cuts. The Federal Reserve may reverse its accommodative monetary policy due to renewed inflationary pressures. Rising interest rates increase borrowing costs for companies and reduce corporate earnings. Higher interest rates act as a drag on consumer spending, which negatively impacts corporate revenues. The S&P 500 declined more than 20% during the Fed’s previous rate-hiking cycle, entering bear market territory. If the Fed hikes rates again, the stock market could face similar or more severe downward pressure. The S&P 500 has already fallen 5% from its recent all-time high as investors adjust expectations.
That’s the real takeaway from the March 2026 FOMC minutes — not that cuts are off the table, but that the Fed has shifted the burden of proof entirely onto inflation data. Markets had priced in a 60% chance of a 25-basis-point cut by September, built on the same kind of gradual disinflation narrative that failed in 2025. The Fed is no longer playing along.
Related Brief 1d ago
monetary policy Australian households face a second hiking cycle as global inflation reignites
Australian households now face a second consecutive rate hiking cycle, compounding financial pressure just as they begin to recover from previous tightening. The Reserve Bank of Australia reversed its 2025 rate cuts in February 2025, responding to persistent services inflation that remains above target globally. This inflation is driven by wage-sensitive sectors and elevated government spending, which in Australia accounts for its highest share of GDP since World War II. Financial markets have priced in 56 basis points of additional RBA rate hikes by November 2025, potentially pushing the cash rate to 4.65 per cent—or beyond 5 per cent. Higher interest rates directly increase borrowing costs, particularly for mortgage holders, squeezing household budgets. The European Central Bank and Reserve Bank of New Zealand have also signaled imminent rate increases, mirroring a global policy reversal. US core PCE inflation rose at a 3.4 per cent annualised pace over six months, exceeding the Federal Reserve’s 2 per cent target. Debt issued during the 2020–2021 near-zero interest rate period is now maturing into a high-rate environment. Jeffrey Gundlach warns small and mid-sized companies face heightened risk of default and insolvency due to refinancing pressures. Without fiscal discipline, Australia may face a severe recession to suppress demand and achieve price stability.
Inside the room, officials are confronting the fact that core PCE inflation has stalled between 2.8% and 3.0%, well above the 2% target and not moving with the momentum they expected. That undermines the entire foundation of their 2026 rate-cut plan. Several participants now openly discuss reassessing policy if progress doesn’t resume.
Related Brief 2d ago
monetary policy Borrowing costs will not drop until late 2027
Consumers and businesses will not see cheaper loans until late 2027. Financial markets have already priced in this shift, reversing expectations held at the start of the year. The Federal Reserve kept its key rate at 3.6% in the March meeting. This decision follows a jump in inflation to 3.4% year-over-year in March, up from 2.4% in February. The surge was driven by rising oil prices tied to the conflict in Iran. Within the Fed, the number of policymakers supporting the possibility of a rate hike has increased from 'several' in January to 'some'. In Federal Reserve terminology, 'some' indicates a larger group than 'several'. Chair Jerome Powell stated that further cuts depend on clear evidence of cooling inflation. The result is that markets anticipate no rate cuts until late 2027.
The language in the minutes is precise: any easing requires “convincing evidence” of sustained disinflation. That’s not a forecast. It’s a threshold. And it’s deliberately high, designed to prevent markets from jumping ahead. The Fed learned its lesson in late 2024, when forward signals sparked a rally that unraveled when inflation rebounded and cuts vanished.
Related Brief 2h 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.
Now, the central bank is keeping options open and expectations unanchored. That’s bad news for growth and tech stocks that have rallied on the promise of cheaper capital. Higher discount rates erode their valuations. Small-cap and leveraged firms face tighter credit conditions. The dollar, already strengthening amid rate differentials with the ECB and BoE, adds pressure on exporters and multinational earnings.
Related Brief 2h 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.
The Fed isn’t waiting for markets to stabilize. It’s waiting for inflation to break.
Related Brief 20h ago
inflation Gasoline price spikes lock in higher borrowing costs for 2026
Interest rate cuts are likely delayed for several months as inflation veers away from the Federal Reserve's 2% target. The Consumer Price Index rose 0.9% in March 2026, the largest monthly increase since June 2022. Gasoline prices jumped 21.2%, the largest spike on record, accounting for nearly three-quarters of that monthly rise. National average retail gasoline prices crossed $4 a gallon for the first time in over three years. Diesel prices increased 30.8%, the biggest gain since the government began tracking the category, while overall energy prices rose 10.9%, the sharpest climb since 2005. The annual inflation rate rose to 3.3% in the 12 months through March, up from 2.4% in February. Core CPI, excluding food and energy, increased 0.2% monthly and 2.6% annually. The price surges followed the U.S.-Israeli war with Iran, which closed the Strait of Hormuz and sent global crude oil prices more than 30% higher. The Federal Reserve's March meeting minutes indicate a growing number of policymakers believe rate hikes may be necessary if inflation remains entrenched.
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