Fed: Holding rates with oil-driven inflation risks – Deutsche Bank

Deutsche Bank economists expect the Federal Reserve to keep rates unchanged at this week’s meeting, emphasising elevated geopolitical uncertainty and oil-driven inflation risks. They see only minor statement tweaks, a focus on financial-conditions transmission via higher energy prices, and a dot plot still signalling one rate cut in 2026, with the outlook heavily dependent on Oil staying near or below $100/bbl.

Rates on hold as inflation risks rise

"Starting with the Fed, our economists expect them to keep rates unchanged this week and think they’ll emphasise elevated geopolitical uncertainty."

"Then at the press conference, they think Chair Powell is likely to stress that recent events mainly transmit through financial conditions—particularly oil prices."

"Core PCE inflation has registered back-to-back 0.4% monthly increases now, pushing the year-on-year rate to 3.1%, the highest since early 2024."

"For the dot plot, our economists are still expecting it to signal one rate cut this year, although it wouldn’t take much to shift the median dot for 2026."

"Beyond the Fed, this week’s incoming data is unlikely to materially alter the tone of the meeting."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)