Fed Rate Cuts Vanish From the Map — Markets Now Price Zero Reductions Through 2031

The interest rate futures market issued its verdict this week — and it isn’t subtle. Fed funds futures pricing as of May 8–9, 2026 shows zero probability of a Federal Reserve rate cut through April 2031. That’s a dramatic repricing driven by stubborn inflation and a geopolitical shock that shows no signs of fading.

The current fed funds target range sits at 3.5%–3.75%, unchanged across three consecutive meetings. The FOMC’s April 29 decision to hold came with an unusual asterisk: four dissenting votes — the most since October 1992 — producing an 8-4 split. Three regional Fed presidents objected to the committee even keeping an easing bias in its statement: Cleveland’s Beth Hammack, Minneapolis’s Neel Kashkari, and Dallas’s Lorie Logan. One governor, Stephen Miran, voted for a cut. That four-way fracture tells you nearly everything about where the Fed stands right now: paralyzed between a labor market that has stabilized and an inflation problem that is actively getting worse.

What’s Driving the Repricing

March CPI came in at 3.3% year-over-year — roughly 130 basis points above the Fed’s 2% target. The single-month gain was 0.87%, driven largely by a 10.9% spike in energy prices tied to the outbreak of the Iran war in late February. Brent crude, which closed 2025 near $61 a barrel, is now trading around $100. Gasoline has jumped approximately 42% since February 27, reaching a national average near $4.24 a gallon.

The Cleveland Fed’s inflation nowcasting model — which pulls from daily oil prices and weekly gasoline data — shows CPI accelerating to a 5.51% annualized rate in Q2 2026. The Fed’s preferred PCE measure is nowcast at 3.89% headline and 3.63% core for the same quarter. These aren’t projections built on assumptions. They are data-driven estimates derived from prices already in the pipeline.

Goldman Sachs revised its December 2026 headline PCE forecast up by a full percentage point since the Iran conflict began, attributing most of that revision to energy. The firm also estimates that 72% of tariff costs have passed through to consumer prices over 12 months — adding roughly 0.8 percentage points to core PCE on their own.

What Wall Street and the Fed Are Saying

“The Fed will shift its focus to containing upside inflation risks now that the labor market appears back on track.” — Lindsay Rosner, Head of Multisector Fixed Income, Goldman Sachs Asset Management

Rosner added that the FOMC could feel compelled to remove its easing bias entirely at the June 16–17 meeting — the first session under incoming Fed Chair Kevin Warsh, assuming the Senate confirms him as expected the week of May 11.

Chicago Fed President Austan Goolsbee put it plainly:

“We’ve been above the 2% Fed target for five years now. We stopped making progress last year, and now the last three months, it’s going up instead of down.” — Austan Goolsbee, President, Chicago Federal Reserve Bank

Wall Street’s institutional forecasts range from cautiously patient to outright hawkish. BNP Paribas, HSBC, JP Morgan, and RBC have all removed cuts from their 2026 outlooks entirely. Bank of America doesn’t see the first cut until July 2027. Morgan Stanley pencils in January 2027. The chance of an actual rate hike before year-end has risen to 3.5% in futures markets — up from zero just before the April 29 meeting.

The Warsh Factor

The leadership transition adds another layer of uncertainty. Kevin Warsh, expected to take the chair at the June meeting, has signaled he would abandon the Fed’s reliance on forward guidance and may deprioritize the core PCE measure — which he has called a “rough swag” of actual inflation. His stated commitment is to price stability “without excuse or equivocation.” Former Chair Janet Yellen has cautioned that moving the full FOMC on rate decisions will require Warsh to win a majority of his eleven colleagues. Given the current 8-4 fracture, that’s no small task.

What Near-Retirees and Savers Should Watch

For anyone relying on fixed income, the immediate read is straightforward: high-yield savings rates and CD yields are not about to fall. Top nationally available CD rates remain near 4%. More significantly, fixed annuity rates — which track the longer end of the rate curve — have surged. Multi-year guaranteed annuity (MYGA) rates have risen 0.75% to 1.85% across most terms this week. Five-year MYGAs are now available at up to 6.30%, compared to 4.15% for the best five-year CD — a 215-basis-point gap that is historically wide. Ten-year MYGAs are reaching 6.5% or higher.

The June 16–17 FOMC meeting is the next major inflection point. Watch for whether Warsh moves to strip the easing bias from the statement — and whether the updated dot plot reflects the inflation surge that has materialized since March. If the dots shift toward a hold, or higher, through 2027, the futures market’s current pricing will look prescient rather than extreme.

Sources

• CNBC — The Federal Reserve Is Quickly Running Out of Reasons to Cut Interest Rates (May 8, 2026)