Federal Reserve and Interest Rates

The Iran war–driven oil shock and hotter-than-expected inflation are complicating the Federal Reserve’s path to cutting interest rates, and the Fed’s new 2026 Summary of Economic Projections and dot plot due Wednesday will show how policymakers are factoring those shocks into their outlook. Economists such as Pantheon’s Sam Tombs still see a bias toward easing in 2026–27 but warn markets could react sharply if the median official projects no cuts this year, as core PCE inflation has accelerated to 3.1% year-over-year in January (from 2.8% in November) and revised jobs data imply essentially no net hiring in December or February, calling into question the Fed’s earlier “low‑hire, low‑fire” labor assessment.