Ceasefire Reshapes Rate Outlook as Markets Revive Fed Cut Bets Article originally posted on Globe St. on April 9, 2026 Expectations for Federal Reserve rate cuts have shifted sharply after a ceasefire between the United States and Iran eased fears of a more severe energy-driven inflation spike, prompting markets to re-evaluate the monetary policy outlook. The agreement follows a period of escalating conflict that began Feb. 28 and had raised concerns about disruptions to global oil supply. While details of the ceasefire remain limited and its durability remains uncertain, markets have interpreted the development as a meaningful de-escalation, reducing the immediate risk of further energy price shocks. That shift has already helped ease pressure on oil prices and softened near-term inflation expectations. Market-implied odds of a rate reduction by year-end jumped to roughly 43% Wednesday, up from just 14% before the announcement, based on the CME Group’s FedWatch tool, which tracks fed funds futures pricing. Markets are now implying a year-end rate near 3.5%, compared with the current effective rate of 3.64%. The shift marks a sharp reversal in sentiment. As conflict in the Middle East intensified, rising oil prices had fueled concerns that inflation could reaccelerate, limiting the Federal Reserve’s ability to ease policy. Before that, investors had anticipated multiple rate cuts this year amid signs of a slowing labor market. Now, with at least a fragile ceasefire in place, those inflation concerns have begun to recede, allowing expectations of policy easing to return to the forefront. “The market is now discounting a clear skew to one cut from the Fed this year,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note that was reported by CNBC. “Assuming a flawed deal likely will be reached, this repricing has more to go, with the looming inflation shock now much less likely to threaten inflation expectations.” Additional data expected this week could further shape expectations, including the latest personal consumption expenditures price index and the consumer price index report, which is expected to reflect the impact of higher energy costs during the period of hostilities. Economists expect the PCE report to show headline inflation at 3% and core inflation at 2.8%, according to Dow Jones consensus estimates. For the March CPI, forecasts stand at 3.3% for headline inflation and 2.7% for core. Economists at Citigroup were particularly optimistic about the development, saying that if oil prices continue to decline and inflation trends remain benign, the Federal Reserve could deliver as many as three rate cuts beginning in September.