Federal Reserve Rate Cut Expectations Slide Amid Inflation Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 12 2026
0mins
Source: CNBC
- Rate Cut Expectations Shift: With energy prices surging to around $100 per barrel, market expectations for a June rate cut by the Federal Reserve have significantly diminished, as analysts believe inflation pressures will complicate easing efforts.
- Economic Forecast Adjustment: Goldman Sachs has pushed back its forecast for a Fed rate cut to September, although it still anticipates one cut before the end of 2026, reflecting a cautious outlook on economic slowdown.
- Market Reaction: Traders in the fed funds futures market have removed the expectation for a September cut, now only anticipating one in December, indicating uncertainty about future economic conditions.
- Inflation Data Impact: The expected rise of the January personal consumption expenditures price index to 3.1% will likely heighten the Fed's concerns about rate cuts, especially with the ongoing uncertainty surrounding the situation in Iran.
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Analyst Views on GS
Wall Street analysts forecast GS stock price to rise
12 Analyst Rating
5 Buy
7 Hold
0 Sell
Moderate Buy
Current: 860.210
Low
604.00
Averages
951.45
High
1100
Current: 860.210
Low
604.00
Averages
951.45
High
1100
About GS
The Goldman Sachs Group, Inc. is a global financial institution that delivers a range of financial services to a large and diversified client base that includes corporations, financial institutions, governments and individuals. Its segments include Global Banking & Markets, Asset & Wealth Management and Platform Solutions. The Global Banking & Markets segment offers a range of services, including financing, advisory services, risk distribution, and hedging for its institutional and corporate clients. It facilitates client transactions and makes markets in fixed income, equity, currency and commodity products. The Asset & Wealth Management segment manages assets and offers investment products across all asset classes to a diverse set of clients. It also provides investing and wealth advisory solutions. The Platform Solutions segment includes consumer platforms, such as partnerships offering credit cards and point-of-sale financing, and transaction banking and other platform businesses.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Institutional Investor Re-entry: In March, $1.32 billion flowed into spot Bitcoin ETFs, indicating a resurgence of institutional investors in the market, which provides a positive signal for crypto recovery and could drive prices higher.
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- Geopolitical Impact: The ongoing conflict in Iran has introduced new inflationary pressures into the U.S. economy, with volatile energy prices and supply chain disruptions prompting the Fed to prioritize price stability in the near term, thereby influencing its monetary policy decisions.
- Leadership Changes: The delayed confirmation of Kevin Warsh's nomination has reduced political pressure on the Fed for a mid-year rate cut; although the incoming leadership is expected to eventually prioritize easing, the current political vacuum justifies the Fed's restrictive stance through the summer months.
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See More
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- Surging Energy Costs: The military strikes by the U.S. and Israel on Iran have caused crude oil futures to rise 74% year-to-date to approximately $100, leading to a long-term crisis in the global energy market that impacts operational costs across various sectors.
- Refining Capacity Damage: According to the French government, 30% to 40% of Gulf oil refining capacity has been damaged during the conflict, resulting in a shortage of 11 million barrels per day, with repairs potentially taking years, further exacerbating market uncertainty.
- Rising Inflation Expectations: Analysts at Goldman Sachs predict that the war will increase U.S. inflation by 0.2 percentage points to 3.1% by the end of 2026, which could undermine consumer confidence and heighten the risk of an economic recession.
- AI Projects Struggling: As energy costs rise, many AI projects are facing profitability challenges, exemplified by OpenAI's decision to shut down its video generation platform Sora, indicating a cautious investment attitude among companies amid the uncertainty of the Trump economy.
See More
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- Inflation Rebound Risk: Rising energy costs are expected to push U.S. inflation up by 0.2 percentage points to 3.1% by the end of 2026, which, while seemingly minor, could exacerbate declining consumer confidence and trigger a recession, complicating the Federal Reserve's efforts to manage inflation.
- AI Economics Strained: Despite a $700 billion investment in generative AI over the past three years, rising energy costs are pressuring many AI projects, with OpenAI shutting down its video generation platform Sora due to high compute costs, indicating the financial strain on the AI sector and signaling increasing uncertainty in Trump's economy.
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See More
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- Oil Price Volatility: Despite an 11.4% surge in oil prices on Thursday, the stock market still rallied, indicating a new understanding of the inverse relationship between oil prices and stocks, which may signal increased investor confidence for the future.
- Strong Employment Data: The U.S. March jobs report revealed an addition of 178,000 jobs, significantly surpassing the Dow Jones estimate of 59,000, suggesting a healthy labor market that could alleviate concerns about stagflation driven by rising oil prices.
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