Fed's Waller went in ready to cut rates, but Iran war oil spike forced a hold — says cuts still possible later in 2026

Federal Reserve Governor Christopher Waller said he entered the March Federal Open Market Committee (FOMC) meeting inclined to support an interest‑rate cut, but the sharp run‑up in oil prices driven by the Iran war pushed him toward backing the Fed’s decision to hold rates steady instead. In a CNBC interview, Waller described himself as “cautious” about how the oil spike and related geopolitical tensions could filter into broader inflation, even though he does not yet see it as a persistent inflation shock. The oil move has been linked to Iran‑related disruptions in the Middle East, including threats to or closures of key shipping routes such as the Strait of Hormuz, which have driven crude prices back above $100 per barrel. Despite supporting a pause, Waller signaled that rate cuts later in 2026 remain on the table if incoming data cooperate. He emphasized that if oil prices stabilize and the labor market continues to show weakness, he would “start advocating again for cutting the policy rate later this year,” indicating he still prioritizes downside risks to growth and employment alongside inflation risks. This stance illustrates an internal Fed balancing act: policymakers are trying to assess how much of the new inflation pressure from the Iran war is a temporary supply shock versus a threat to longer‑run inflation expectations, while also responding to a softening job market. Waller’s comments matter for markets because he has been one of the more influential voices on the FOMC’s pivot narrative and had previously been seen as supportive of a cutting cycle before the conflict‑driven oil spike. His shift from being ready to ease to advocating a “wait‑and‑see” approach underscores how quickly geopolitical shocks can alter the Fed’s reaction function and reset expectations for the path of U.S. interest rates. Traders have already scaled back near‑term cut bets and are more focused on incoming inflation and labor‑market data, as well as on the evolution of the Iran war and oil prices, to gauge when or whether the Fed can safely begin reducing borrowing costs.

✨ AI-generated background, compiled from web sources — not editorial content.

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