Iran War Oil Shock Prompts Economists to Push Fed Rate Cut Forecasts Into Late 2026
CBS reports that the Iran war’s hit to global oil and gas supplies is forcing Wall Street economists to scrap earlier expectations of mid‑2026 Federal Reserve rate cuts, with some now seeing no cuts before December and others warning the Fed may even have to hike later this year. The story says CME FedWatch now assigns a 99% probability that the Fed will keep its benchmark rate at 3.5%–3.75% on March 18, a 95% chance of no change on April 30 and a 77% chance of no move in June—probabilities that were far lower just a month ago. Analysts cite soaring energy prices and a January uptick in the Fed’s preferred inflation gauge, the PCE index, as reasons inflation could run above target even as the labor market softens, with employers unexpectedly shedding 92,000 jobs in February. Economists like EY‑Parthenon’s Gregory Daco and Carson Group’s Sonu Varghese are now openly entertaining scenarios of zero cuts in 2026 and potential hikes, underscoring a growing fear in markets that war‑driven inflation will keep borrowing costs elevated for consumers and businesses. The piece also notes that Trump‑nominated Fed chair‑designate Kevin Warsh could take over from Jerome Powell in May just as these pressures peak, inheriting a politically explosive mix of stubborn inflation, weakening jobs and public anger over high rates.
📌 Key Facts
- CME FedWatch now assigns a 99% probability the Fed holds its benchmark rate at 3.5%–3.75% at the March 18 meeting, 95% in April and 77% in June.
- Economist Gregory Daco now forecasts only one 0.25‑percentage‑point cut in 2026, likely in December, and says it is plausible the Fed will not cut at all this year.
- U.S. employers shed 92,000 jobs in February even as the Fed’s preferred inflation gauge, the PCE index, showed prices edging higher in January before the full impact of the Iran war oil shock.
📊 Relevant Data
Black households in the US experience energy burdens that are 64% higher than White households, disproportionately affected by high energy costs.
Centering Energy and Environmental Justice in the Buildings Sector — National Renewable Energy Laboratory (NREL)
In 2023, 22% of Black people in the United States experienced food insecurity, which is more than twice the rate of White people.
Food Insecurity in Black Communities — Feeding America
In February 2024, the unemployment rate for Black workers was 5.6%, compared to 3.4% for White workers and 5.0% for Hispanic workers.
Unemployment rate at 3.9 percent in February 2024 — Bureau of Labor Statistics
As of 2023, Black service members make up 16.6% of the active-duty military, compared to their 13.6% share of the US population, indicating overrepresentation.
2023 Demographics Report — Military OneSource
Inflationary oil supply shocks tend to hurt the least affluent households more than the most affluent, with lower-income earners facing greater impacts from higher gasoline prices.
Who is most affected by inflation? Consider the source — Stanford Institute for Economic Policy Research
📊 Analysis & Commentary (1)
"The piece argues that the Iran war’s oil shock has brought macroeconomics back to the forefront—forcing forecasters to postpone Fed rate cuts, exposing the limits of one‑off fixes like SPR releases, and underlining that policymakers must reckon with large supply‑side geopolitical shocks rather than assume a smooth return to disinflation."
📰 Source Timeline (1)
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