TD Securities economists say the FOMC kept policy unchanged and Powell downplayed the SEP, but they see the Fed’s patience on inflation normalization expiring by late summer as an Oil shock lifts headline inflation. They still project three 25 bp cuts from September 2026 to March 2027, while acknowledging rising risks of further delay.

On hold now, cuts from late 2026

"It seems to us the runway for patience around inflation normalization has an expiration date by the end of the summer amid an incoming oil shock that will temporarily derail headline inflation. The Fed will look through that shock if tariff pass-through shows signs of abating. Long-term inflation expectations will also play a key role in granting the Fed space to observe how the economic pieces settle in the near term."

"We continue to have a more optimistic view for inflation outcomes by the third quarter of the year when we assume the m/m profile would be such to allow the Fed to resume policy normalization. We continue to project three 25bp cuts in a quarterly fashion starting in September 2026 through March 2027."

"However, given geopolitical uncertainty and the ramification for energy prices, risks are rising around the Fed opting to continue postponing easing this year. The evolution of the Middle East conflict will dictate the Fed's policy options in coming months."

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