Markets Lose Hope for Fed Interest Rate Cuts Amid Inflation Fears

Expectations for the Federal Reserve to lower rates are rapidly fading as energy prices and inflation concerns rise.

Mar. 12, 2026 at 7:18pm

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As energy prices and inflation fears surge, market expectations for the Federal Reserve to cut interest rates have rapidly diminished. Traders have abandoned hopes of an early summer easing from the central bank, with the focus now shifting to the Fed's fight against inflation rather than potential rate cuts. Goldman Sachs and other market analysts have pushed back their forecasts for the next rate cut, with some now not expecting any cuts until late 2026 or even 2027.

Why it matters

The shift in market expectations reflects growing concerns about the persistence of high inflation, which could force the Fed to keep rates higher for longer to bring price pressures under control. This could have significant implications for the broader economy, as higher borrowing costs could slow consumer spending and business investment.

The details

Prior to the recent U.S.-Israel conflict with Iran, which sent oil prices spiking, the market had anticipated the Fed would cut rates by a quarter percentage point in June, followed by another cut in September. However, the surge in energy prices and inflation fears has now pushed those expectations off the table. Goldman Sachs has officially adjusted its rate forecast, pushing back the next cut to September from June, though the firm still expects one more cut before the end of 2026. Other market players are even more pessimistic, with traders in the fed funds futures market now only pricing in a single rate cut, in December, and no additional cuts until well into 2027 or 2028.

  • On March 12, 2026, expectations for Federal Reserve interest rate cuts were rapidly fading.
  • Prior to the recent U.S.-Israel conflict with Iran, the market had anticipated rate cuts in June and September 2026.
  • The Commerce Department is set to release January 2026 personal consumption expenditures price index data on Friday, which could further influence the Fed's policy decisions.

The players

Federal Reserve

The central banking system of the United States, responsible for monetary policy and setting interest rates.

Jerome Powell

The current Chair of the Federal Reserve, who is set to leave the position in May 2026.

Kevin Warsh

The presumptive new Chair of the Federal Reserve, appointed by President Donald Trump, who is expected to take over in May 2026.

Goldman Sachs

A major global investment bank and financial services company.

Bank of America

A multinational investment bank and financial services company.

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What they’re saying

“A higher inflation path will make it harder for the Fed to start cutting soon.”

— Goldman Sachs economists

“If the labor market weakens sooner and more substantially than we expect, we do not think that concern about the impact of higher oil prices on inflation and inflation expectations would be an obstacle to earlier rate cuts.”

— Goldman Sachs economists

“The upshot is that the Fed should not be in a rush to ease rates further.”

— Stephen Juneau, Bank of America economist

“Where is the Federal Reserve Chairman, Jerome "Too Late" Powell, today? He should be dropping Interest Rates, IMMEDIATELY, not waiting for the next meeting!”

— President Donald Trump

What’s next

The Federal Open Market Committee will issue its next rate decision on March 18, 2026. Traders are currently assigning a nearly 100% probability that the committee will keep rates on hold.

The takeaway

The shift in market expectations for Fed rate cuts reflects growing concerns about the persistence of high inflation, which could force the central bank to keep rates higher for longer to bring price pressures under control. This could have significant implications for the broader economy, as higher borrowing costs could slow consumer spending and business investment.