Last-Chance Rate Cut from the Fed?

It’s almost that time again!

The next meeting of the Federal Reserve’s Open Market Committee is coming up in just two weeks — and it may result in the year’s final interest rate cut…

As I’ve been saying for months here in Moneyball Economics, the broad economy is in the middle of a transformation. And it’s evolving faster than most investors and pundits can keep up with.

Most experts expected to see multiple rate cuts in 2026 as part of a broader “return to normal.” But I warned readers that things weren’t going to be quite so simple.

So let’s dive once again into the “Big Picture” data driving economic policy, and see whether the upcoming FOMC meeting could deliver the rate cut investors have been after.

Click the video below to start:

Video transcript:

Welcome to Moneyball Economics.

I’m your host, Andrew Zatlin, and guess what? It is that time again when the Federal Reserve gears up to make their decision about interest rates.

At the end of this month, the Fed gets together again. And the question on the table is, what are they going to do with interest rates? I’m of the opinion that we’re done with interest rate cuts. We’re actually going to start hearing talk about an interest rate hike towards the end of the year. In fact, I think consensus is starting to come around to that opinion as well.

Nevertheless, there are a lot of people out there who think the door isn’t completely shut in April, that in two weeks’ time, the Fed might be looking at the economic data and thinking maybe one more rate cut.

So today, let’s talk about what the Fed is going to be looking at when they make that decision.

And they’re going to be looking at, as always, two key things. One, what’s going on with employment, and two, what’s going on with inflation? And guess what? In the last week or so, we have gotten snapshots of the latest and greatest view of payrolls and inflation. If you look at payrolls, what are you going to see? You’re going to see a very soft employment market out there.

Obviously, 2025 was thrown in the trash heap of no job growth. And this year, it’s been very lumpy. January was super high. February’s super low, March super high.

But when you add it all together, the run rate’s about, I don’t know, about 70,000 plus minus per month in terms of private sector jobs. Not that exciting. In fact, it’s a weak job market. Unless you’re looking at jobless claims, which are super strong. Nevertheless, payroll say economy soft could really absorb that rate cut.

Now we talk about the inflation story. There are two parts. One is consumer side, which came out last week, and the other is producer side, which came out today. Consumer, inflation, very mild. Obviously, inflation, the whole story, whether it’s producer or consumer, it’s going to be dominated by what’s going on with oil.

And that is where things get interesting…

On the consumer side, again, if we look beyond the impact of energy, consumer inflation actually is trickling down. So that, again, sets things up for the Fed to cut interest rates. Payroll’s low, inflation low. Hey, let’s juice the economy up a little bit.

However, even in consumer inflation, even after we strip out energy prices, transportation costs went up as they would, right? Because airplanes use a lot of fuel and fuel rocketed up, if you will. Well, that same type of energy dominance of the story of the narrative is also seen more directly in producer inflation, which came out today.

Now, the cool part about producer inflation is that the market was expecting a surge in inflation. Last month, it was 0.5% month over month growth of inflation. This time, 1.1% was expected. And guess what? No, it didn’t happen. Inflation was much more subdued on the producer side. It came in at 0.5%. In fact, services inflation went down.

However, we can’t just ignore the impact of oil prices.

One thing to recognize when we’re talking about consumer and producer inflations is that they’re kind of a sequence. They’re not happening in parallel. What the producers are facing for their inflation, that comes in earlier in the cycle. That’s what consumers can expect to see because this is what the truckers have to charge to get the food to the supermarket.

So this producer inflation jumping up and it’s staying up. Well, unfortunately, that is tied to energy prices and those energy prices are signaling that more inflation will happen in the month of April and it’s going to be passed along to consumers.

So to net it out, right now, inflation looks tame and going down, but higher oil prices and fuel prices, diesel fuel went up almost 50% in the month of March. So these higher fuel prices are going to be passed along.

And as a result, in April inflation, when we get to the reading of that in May, it will spark up a little bit higher. So the Fed’s got to kind of say, “Well, to what degree is the economy slow without this inflation?”

Because again, their concern is if we lower interest rates that stimulates some activity, that then leads to some inflation, good inflation or bad inflation. And then they’ve got this oil inflation that is transitory. So they’re going to make some decisions here. If they look past the oil and energy inflation, they’re going to see a subdued economy that can absorb a rate cut, but they might again kick the can.

I think they will because they do see the economy starting to perk up. And also, they’re just unsure what to do with Trump. They just don’t know. And it’s possible that they’re just going to kick the can one more month, maybe wait again. I’m not sure how the market’s going to take that though, so be prepared in two weeks. In the meantime, economic data is still saying that we are off the bottom.

It’s just a question of how much off the bottom and how fast are we going to get into this new Trump cycle. Wait and see. I think we are going to land really strong as this quarter progresses and we’re just going to be moving up faster and faster as the year goes on.

We’re in it to win it, folks.

Zatlin out.