Fed may hold rates steady through 2026 as inflation risks persist: ICICI Bank – Firstpost

The US Federal Reserve is likely to keep interest rates unchanged through 2026 as inflationary pressures remain elevated amid rising energy prices and geopolitical tensions, according to a report by ICICI Bank.

The report said the latest US inflation data validated the cautious stance adopted by the Federal Open Market Committee (FOMC), with policymakers increasingly concerned about upside risks to inflation.

“For FOMC, the release validated the need to acknowledge the upside risks to inflation. We maintain our view of the US central bank maintaining status quo throughout 2026,” the report stated.

According to the report, inflation in the United States is expected to remain high in the coming months, largely due to elevated energy prices linked to the ongoing conflict in West Asia.

“Going forward, inflation is expected to continue to remain high in May driven by high energy prices as the effects of the conflict in West Asia continue to linger,” the report added.

The report noted that the latest Consumer Price Index (CPI) data came in above expectations and remained significantly higher than the Fed’s long-term target, reflecting the continuing impact of energy price shocks on the broader economy.

“Overall, the CPI report showed that inflation printed above expectations, remaining well above the FOMC’s target level as the effects of energy price shock from the ongoing conflict continue to show up in prices,” the report said.

ICICI Bank further said the persistence of energy-driven inflation risks supports the Federal Reserve’s decision to maintain status quo during its April policy meeting.
“The release supports the FOMC’s decision to maintain the status quo in the April policy meeting as it refocuses the build-up of inflation risks,” the report added.

The assessment comes at a time when global markets are closely tracking the Fed’s policy trajectory amid uncertainty over oil prices, geopolitical instability, and slowing global growth.