On 16/4, Deutsche Bank, a German financial institution, predicted the Federal Reserve (Fed) would maintain its interest rates throughout 2026. This forecast stems from persistent inflation risks, largely driven by oil prices amid the Middle East conflict, coupled with robust US economic growth and a tight labor market. These factors leave the Fed with limited room to ease its monetary policy.
For the Fed to consider cutting interest rates this year, analysts at Deutsche Bank indicated that a weakening of the US labor market and a cooling of inflation would be necessary. The bank had previously anticipated a single rate cut in September.
Joining Deutsche Bank, other major financial institutions like JPMorgan and HSBC have also dismissed the likelihood of the Fed cutting rates this year. However, Goldman Sachs, Morgan Stanley, and BofA Global Research continue to expect two rate reductions, with the first projected for September.
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Fed Chair Jerome Powell speaking in Washington, US on 10/12/2025. *Photo: Reuters* |
In recent days, several Fed officials have voiced concerns that the ongoing Middle East conflict is intensifying inflationary pressures. The high level of geopolitical uncertainty also complicates their ability to provide clear signals regarding future policy adjustments.
During its March policy meeting, the Fed opted to keep the benchmark interest rate unchanged at 3,5-3,75%. At that time, Fed Chair Jerome Powell acknowledged that the full impact of developments in the Middle East on the US economy remained uncertain. He stated, "In the short term, rising energy prices will push overall inflation higher, but it is too early to assess the scale and duration of potential impacts on the economy."
Despite the current outlook, Fed officials had previously indicated a potential for one more policy easing this year, by 25 basis points (0,25%). The central bank's next policy meeting is scheduled for the end of April.
Data firm LSEG reported that the market is currently pricing in a nearly 70% chance of the Fed not cutting interest rates this year. Deutsche Bank further commented that while "the possibility of an interest rate hike this year is no longer low, we do not believe this will happen in 2026."
Ha Thu (according to Reuters)
