FOMC to hold rates steady amid Iran conflict concerns

The FOMC meeting on April 28-29 is expected to maintain the current interest rate range of 3.50-3.75%, with the market for a 50+ bps cut after the April meeting at 10% YES. CME FedWatch shows a 90% probability of no change.

Market reaction

For the April 2026 rate decision, traders have priced in a hold. Jerome Powell’s press conference and statement language are the primary volatility drivers. Forward guidance matters more than the rate decision itself, particularly with the ongoing Iran conflict affecting energy prices and inflation expectations. The March to June sequence market reflects this too: a Cut-Pause-Pause sequence looks less likely under current conditions.

The June 2026 Fed decision market sits at 4.2% YES for a 25 bps cut, unchanged from a week ago. Traders see little probability of a near-term cut.

Why it matters

Trading volume in these markets is thin. The April decision market shows no recent activity. The June market has a daily face value of $17,639 but only $803 in actual USDC traded. It takes $1,719 to move the June 2026 market 5 percentage points, meaning large orders can cause outsized swings.

The fixation on language rather than rates reflects uncertainty about economic fallout from the Iran conflict. At 10¢, a YES share on a 50+ bps cut pays $1, a 10x return if the unlikely event occurs. Anyone buying that position needs to believe in an unexpected escalation of economic risks that forces the Fed’s hand.

What to watch

Watch Powell’s press conference for any remarks on inflation risks or economic consequences from the Hormuz tensions. His language could shift market sentiment even if rates stay unchanged.

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