Fed holds rates steady amid inflation concerns, Powell highlights Middle East risks
The Federal Reserve held interest rates steady amid ongoing inflation concerns, with Chair Jerome Powell citing risks from the Middle East conflict and elevated energy prices. Inflation metrics remain above target, and the central bank emphasized a cautious approach to future rate cuts. Market expectations for rate reductions in 2026 have decreased following the decision.
- ▪The Fed held rates steady due to inflation concerns and Middle East tensions affecting energy prices.
- ▪Market pricing shows a reduced probability of a rate cut by June 2026, now at 4.5%.
- ▪There are indications of potential dissent among FOMC members regarding the decision to maintain rates.
- ▪CPI and PCE inflation measures are both above 3%, influencing the Fed's cautious stance.
- ▪Powell highlighted uncertainty from the US-Iran conflict while noting steady domestic economic expansion.
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## Market Snapshot Fed Rate Cut Timing market is currently pricing a 4.5% YES for a rate cut by June 2026, down from 6% 24 hours ago. The Fed Decision June and July market has decreased to 3.9% YES for a 25 bps rate cut after the June meeting. Dissent at April Fed Meeting market activity suggests an increased likelihood of dissent among FOMC members. ## Key Takeaways – The Fed’s decision to hold rates steady appears to decrease the likelihood of a rate cut by June 2026, consistent with inflation concerns. – Markets suggest that the probability of a rate cut in June or July has decreased, given the Fed’s focus on inflation stability. – There is an indication of potential dissent among FOMC members due to the decision to maintain rates amidst high inflation.
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