Markets Push Fed Rate Cuts Back as Iran Tensions Curb Easing Bets
Global financial markets are shifting expectations for U.S. interest-rate moves amid growing attention to Iran-related tensions and their potential impact on inflation. The chatter centers on whether the Federal Reserve will loosen policy this year and, if so, when.
The Financial Times reported that inflation pressures tied to the Iran conflict have narrowed the Fed’s room to ease, suggesting rate cuts may be unlikely. Futures markets now price in little to no easing before next summer, a sharp shift from earlier bets that the Fed would cut in multiple steps this year.
TD Securities of Canada echoed that assessment, arguing the Iran situation has wiped out many anticipated rate-cut scenarios. They warned that persistently high oil prices, driven by geopolitical risk, would make a traditional easing cycle much harder for the Fed to justify.
Reuters likewise found that futures trading has pared back expectations for rate reductions, with bets leaning toward roughly one 0.25 percentage point cut this year rather than multiple cuts. The outlook remains uncertain and highly sensitive to geopolitical and macroeconomic developments.
Goldman Sachs moved the timing of its first rate cut for this year from June to September, making it among the earliest of the major U.S. banks to push back its forecast. The shift underscores how market and equity dynamics are reframing expectations for monetary policy timing.
A Reuters poll of 96 economists showed a degree of consensus still favoring a cut in the near term: 63 respondents expected a 0.25-point reduction in the second quarter. That shows broad, but tempered, expectations amid prevailing risks.
President Donald Trump, whose term in office was approaching its end at the time, urged Fed Chair Jerome Powell to cut rates immediately on social media, even as the market weighed the more cautious outlook reflected by analysts and traders. Reports noted that Trump had tapped Kevin Warsh, a former Fed governor with a more accommodative bent, as a potential successor, though markets remained focused on broader macro risks.
Why this matters for the United States beyond Korea: Fed policy shapes borrowing costs for households and businesses, influencing mortgage rates, auto loans, and corporate financing. The strength of the dollar and global capital flows can respond to shifting expectations, affecting imports, inflation, and consumer spending. Crude oil prices and energy markets, already sensitive to geopolitical conflict, feed into inflation trajectories and monetary policy decisions. For investors and policymakers in the United States, the evolving outlook on rate cuts also informs risk sentiment, equity valuations, and supply-chain resilience through the year.