The Federal Reserve's rate outlook has undergone a dramatic recalibration, with markets now pricing zero cuts through 2027. Wells Fargo formally revised its outlook, stating it no longer expects the Federal Reserve to cut interest rates in 2026, while traders are increasingly pricing in scenarios where the Federal Reserve makes zero rate cuts in 2026, with probabilities rising to 40% in recent weeks.

The market moves tell the story: January 2027 rates above 2.75% dropped 56¢ to 24¢, while April 2027 rates above 2.75% jumped 40¢ to 91¢. While headline CPI jumped 0.9% month over month in March due to higher gas prices, looking ahead, both upside risks to inflation and downside risks to employment remain, pulling the interest rate outlook in opposite directions. The Committee decided to maintain the target range for the federal funds rate at 3‑1/2 to 3‑3/4 percent as inflation remains somewhat elevated.