Oil Prices and Inflation Can Delay the Fed’s Rate Cut, How Come?

Jakarta, Pintu News – Economists from Morgan Stanley estimate that rising oil prices and persistent inflationary pressures could delay the Federal Reserve’s (Fed) planned interest rate cut in 2026.

Morgan Stanley’s Chief U.S. Economist, Michael Gapen, stated that the Fed will likely take a more cautious approach in determining monetary policy going forward. Initially, interest rate cuts were projected to occur in June and September, but are now expected to be pushed back to September and December.

Inflation Still the Main Focus

The increase in oil prices has been one of the main factors pushing inflationary pressures back up. This makes the Fed need more time to ensure that the disinflation process actually occurs before starting to lower interest rates.

In addition, the latest FOMC meeting results show that price stability is still the top priority over labor market conditions. Although the unemployment rate has remained relatively stable, employment growth has started to slow down.

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Opportunities in the Bond Market

Amidst these conditions, Morgan Stanley sees potential opportunities in the U.S. Treasuries market. According to Head of Macro Strategy, Matthew Hornbach, if this scenario occurs, bonds can be an attractive hedging instrument against risky assets such as stocks.

In addition, although the market has not yet fully priced in the number of interest rate cuts, bonds continue to exhibit characteristics as a strong defensive asset.

Conclusion

The combination of rising oil prices and inflationary pressures has the potential to delay the Fed’s monetary easing policy. In this situation, investors need to pay attention to changes in the direction of interest rate policy, as well as consider portfolio diversification, including to bond instruments as hedging assets.

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Reference

• The Daily Hodl. Oil Prices and Inflation Primed To Push Back Federal Reserve Rate Cuts, Says Morgan Stanley Economist. Accessed April 2, 2026