The Federal Reserve is expected to cut interest rates once this year despite the surge in oil prices.
An eagle is seen trapped in a construction fence at the Mariner S. Eccles Federal Reserve Building, the Federal Reserve’s main office, in Washington, D.C., USA, September 16, 2025.
Kevin Dietsch | Getty Images News | getty images
The Federal Reserve expects to cut interest rates once this year despite a surge in oil prices due to the Iran war.
The central bank’s so-called dot plot, which shows the anonymous expectations of 19 individual members, showed a median estimate of 3.4% for the federal funds rate at the end of 2026, the same as expected at the end of last year.
However, a closer look at the overall dot plot shows that the outlook balance has shifted toward smaller declines. This means more members are expecting one decline, up from two declines previously.
“The median was unchanged, but there was actually meaningful movement toward reducing people’s cuts,” Federal Reserve Chairman Jerome Powell said in a speech after the meeting. “So four or five people went from cut two to cut one, let’s say, from cut two to cut one.”
The Federal Reserve kept interest rates unchanged at an 11-to-1 ratio on Wednesday to keep the federal funds rate in a range of 3.5% to 3.75%.
Traders started the year hoping for two rate cuts. But those expectations have been pushed aside in recent weeks by data showing higher inflation that could put central banks on hold.
In particular, the job of former Federal Reserve President Kevin Warsh, who will succeed current Chairman Powell when his term ends in May, becomes more complicated. Prime Minister Wash, who was handpicked by President Donald Trump, said he supports lower interest rates.
The Fed’s summary of its economic outlook shows higher inflation expectations and slightly faster growth this year.
The personal consumption expenditure inflation outlook has increased from 2.4% to 2.7% in December 2026. The outlook for core inflation, which the Federal Reserve monitors more closely, excluding volatile food and energy prices, also rose from 2.5% to 2.7%.
However, the rate of change in real GDP rose from 2.3% in December to 2.4%.
According to the CME FedWatch Tool, federal funds futures are last priced in just one rate cut in 2026, making it more likely that the central bank will keep rates unchanged.
— CNBC’s Gabriel Cortes and Jeff Cox contributed to this report.
