Market Maker Rate Cuts Are Gone. Rate Hikes Are Back.
Mar 20, 2026
Central banks surprised markets by shifting hawkish as inflation risks re-emerge. Rising energy and oil disruptions could ripple into food, wages and broader inflation. Bond yields and market pricing are repricing rate expectations. The UK and Europe face acute energy vulnerabilities that could force earlier action.
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Fed Drops 2026 Rate Cut Forecasts
- The Fed revised its inflation outlook higher and removed expected 2026 rate cuts, shifting policy from easing to neutral/hawkish.
- Powell highlighted pre-Iran inflation signs like a 3.4% PPI print and lingering tariff effects that keep upside risk into 2026.
When Energy Shocks Become Monetary Policy Problems
- Energy shocks only warrant rate action if they leak into broader inflation via wages, food, or producer costs.
- Natural gas can raise fertilizer costs now and food prices months later, creating delayed inflationary feedback.
Markets Price Out 2026 Fed Cuts
- Market pricing moved from two Fed cuts in 2026 to essentially none, pushing the earliest likely cut into March 2027.
- Even previously dovish FOMC members revised down their expected cuts, tightening the dot plot.