Fed rate cuts delayed to late 2026 amid Iran conflict inflation risks

Fed Chair Jerome Powell announced that rate cuts are now expected in late 2026 due to inflation risks from the Iran conflict. The odds of a Fed rate decrease by 25 basis points after the April 2026 meeting sit at 0.4% YES, up from 0% twenty-four hours ago.

The Fed Rate Decisions market prices in a delay in rate cuts tied to inflation concerns from the Iran conflict. The 0.4% YES on 25 bps cuts is a minor uptick, while 50+ bps cuts remain static at 0.1% YES. Traders are skeptical about any cuts following the April meeting as military tensions in the Middle East drive up oil prices, complicating the Fed’s inflation targets.

Trading volume in the Fed Rate Decisions market is $3,074 in daily USDC traded, with $5,326 needed to move prices by 5 points, indicating moderate liquidity. The largest price move was a 0.4% spike, suggesting limited trader conviction on imminent rate cuts. The US Recession 2026 market remains inactive, but Powell’s comments could stir activity as sustained high rates increase recession risks.

The probability of a Fed rate cut has dropped, reflecting Powell’s cautious stance amid geopolitical turmoil. A YES position at 0.4¢ would pay $1 if cuts occur, a 250x return. That bet assumes significant cooling of inflationary pressures combined with dovish Fed signaling.

Watch for Powell’s upcoming speeches or FOMC minutes release, which could clarify the Fed’s approach to persistent inflation driven by the Iran conflict. Any shift in language on inflation or geopolitical risks could move these markets.

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