A month ago, rate cuts were looking like a sure thing. Not anymore.

What Changed

Before the Iran war, futures markets were pricing in more than two rate cuts this year.

Now they're down to one. The odds of no cuts at all in 2026 have climbed from 6% to nearly 16% in the span of a week. The CME FedWatch tool shows a 97.3% chance the Fed holds steady at its March 18 meeting.

The culprit is oil. With Brent crude still trading well above $90 and gas prices up roughly 58 cents per gallon since the war began, inflation expectations have shifted — and the Fed can't cut rates while prices are still rising.

The Squeeze the Fed Is In

It's not a simple picture. The February jobs report showed the economy shed 92,000 jobs — exactly the kind of weakness that would normally justify cutting rates.

But former Fed Chair Janet Yellen told a conference Monday that the Iran situation puts the Fed "even more on hold, more reluctant to cut rates than they were before."

Chicago Fed President Austan Goolsbee framed the bind plainly: "If the job market is getting worse and inflation is getting worse at the same time, it's not obvious to me what the immediate response should be."

What to Watch

The next realistic window for a cut is July or September, analysts say — and that assumes the war doesn't drag out.

Goldman Sachs estimates inflation could hit 3% by year-end if oil stays elevated. CNN reported that even Kevin Warsh, Trump's dovish Fed nominee, would have a hard time making the case for cuts under these conditions.

The March 18 decision itself is a foregone conclusion. What matters is what Powell says about the rest of the year.