The war’s economic shock has killed the rate cut. Investors now expect no Fed move until 2027.

Investors now expect no rate cuts this year — and no change to the Federal Reserve’s policy rate until the end of 2027. The war-driven oil shock has erased all near-term easing bets, locking borrowing costs in place for years. The Fed held rates at 3.5% to 3.75% in March, a decision made as oil prices surged from $70 to $100 per barrel. That jump reshaped the central bank’s economic framework, elevating stagflation risks as a central concern. Nearly all policymakers raised their inflation forecasts for 2026, reflecting deeper unease about price pressures. Some officials, already wary of inflation stuck above 2%, had even considered signaling a rate hike. Though the March statement didn’t shift language toward tightening, the upcoming minutes may reveal how close the Fed came to pivoting. Chicago Fed President Goolsbee called the moment an ‘unsettling’ escalation from orange to red alert, citing both persistent tariff-driven inflation and the new energy shock. With inflation expectations unanchored and growth at risk, the Fed’s path has shifted from cuts to a prolonged wait — and investors have priced in silence through 2027.