The Fed Waits: Why Rate Cuts Aren’t Coming Despite Falling Oil

While the stock market jumps from record high to record high, the Federal Reserve remains surprisingly quiet. San Francisco Fed President Mary Daly made it clear on Friday: despite falling oil prices, the Fed won’t be cutting rates anytime soon.

What Daly Said

“Right now, policy is in a very good place — slightly restrictive, not constraining the economy so much that the labor market is faltering, not letting go of the reins completely,” Daly said at an event at UC Berkeley. Her conclusion: “Being in a wait-and-see mode is a really nice place to be.”

Daly was in favor of rate cuts before the Iran war. Now she’s changed her position. The reason: nobody knows whether oil will stay at $83 or be back at $100 next week. This uncertainty makes a rate decision impossible.

Why This Matters

Markets had priced in two rate cuts for 2026 at the start of the year. Those expectations have been completely walked back. Fed funds futures show the overnight rate ending the year in the 3.50–3.75% range — unchanged.

Six of ten G10 central banks are now expected to raise rates in 2026 according to Goldman Sachs — up, not down. The Iran conflict has completely changed global inflation dynamics.

The Exception: The 10-Year Yield Is Falling

Interestingly, the 10-year Treasury yield fell 6.5 basis points on Friday to 4.24%. The bond market is pricing in easing inflation — even without a Fed rate cut.

For stocks, this is positive: lower long-term rates make growth stocks more attractive. This partly explains why the Nasdaq has risen 13 consecutive days.

For Investors

Don’t expect a rate cut before fall — at earliest. The Fed will wait out the Iran conflict, monitor inflation, and only act when clarity emerges. For the stock market, this isn’t necessarily bad: as long as the economy stays strong (labor data remains robust — initial claims at just 207,000), the market doesn’t need rate cuts as a catalyst. Track market mood with our Fear & Greed Index.