The Fed Holds, Again. But For How Long?

The Federal Reserve goes into its April 28-29 FOMC meeting with interest rates sitting at 3.50% to 3.75%, exactly where they were after the March 18 decision. Markets have priced in a 100% probability of no change, according to CME FedWatch data, and Fed funds futures suggest rates are most likely to stay on hold for the rest of the year. The odds of a rate hike by year end stand at 8%. None of that makes this meeting uneventful. It will be the last meeting chaired by Jerome Powell before Kevin Warsh is expected to take over in May. March inflation data came in at 3.3% year over year, the highest since May 2024. The Personal Consumption Expenditures index is tracking toward 4% by year end according to some projections. The FOMC’s March meeting minutes noted that “some participants remarked that further progress in reducing inflation had been absent in recent months,” and Powell himself said the country had not made as much progress on inflation as hoped. What the Fed is really doing right now is watching. The oil shock from the Strait of Hormuz disruption is a supply-side event, and the Fed cannot resolve supply side problems by moving interest rates. Rate hikes into a supply shock that is already slowing growth would risk tipping the economy into recession. Rate cuts into accelerating inflation would risk undermining credibility built over years. The median Fed projection going into this meeting still calls for just one 25 basis point cut in 2026. Whether that single cut survives the year will depend heavily on how quickly oil prices stabilize and whether the inflation pickup proves temporary.