The Federal Reserve kept their Federal Funds Rate unchanged at 3.5% to 3.75% in an 11-1 vote, despite one official favoring a small cut. The decision came as the Fed weighed rising economic uncertainty from the war in Iran, which has disrupted global energy supplies and pushed oil and gas prices sharply higher.

Higher energy costs are worsening inflation concerns. Oil prices surged above $109 globally, and U.S. gas prices jumped to $3.84 per gallon on average. While the Fed usually looks past volatile food and energy shocks, officials are under pressure not to let inflation flare up again after recent years of pandemic, war, and tariff-driven price spikes.

Fed Chair Jerome Powell said inflation is still too high, with core inflation at 3%, and noted that tariffs are contributing significantly. The Fed wants clearer progress on inflation before considering the impact of energy prices or cutting rates.
Economists cited stable unemployment, near-neutral interest rates, and elevated oil prices as reasons the Fed is likely to stay cautious, though some still expect cuts later.

Because of the more hawkish talk from Fed members, rising oil prices, and an EU Central Bank rate hike, the bond market has been selling off. As bonds sell off, interest rates increase. The only silver lining here is when things subside in Iran and oil prices return to normal, we should see a rebound in the bond market and interest rates pointed to decrease once again.

Source : https://bit.ly/4cVliek