Fed rate cuts pushed to late 2026 as Middle East war fuels inflation surge

The Federal Reserve has delayed anticipated rate cuts to late 2026 due to renewed inflation pressures stemming from escalating conflict in the Middle East, according to ForexLive. The surge in regional hostilities has disrupted energy supply routes and driven up oil prices, triggering a repricing of inflation expectations and reinforcing the Fed’s hawkish stance. This shift strengthens the U.S. dollar as higher-for-longer interest rate differentials attract capital inflows, while emerging market currencies in the region face depreciation pressures. Markets are now pricing in sustained tight monetary policy, with the next key catalyst being the upcoming CPI release in June 2025, which will signal whether inflation remains entrenched above target.

The US Dollar (USD) is the world's primary reserve currency and the base for most forex majors. Headlines about Federal Reserve policy, US macro data (CPI, NFP, GDP), and Treasury yield shifts typically drive USD pair direction within seconds of release.

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