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Investors scale back bets on Fed rate cuts

Financial Times
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Escalating Middle East tensions—particularly the Iran conflict—have disrupted financial markets, prompting investors to revise expectations for Federal Reserve interest rate cuts in 2026. Traders now anticipate fewer or delayed rate reductions as geopolitical instability fuels inflation concerns, reversing earlier bets on aggressive monetary easing. The Fed’s policy outlook remains uncertain, with officials signaling caution amid volatile oil prices and supply chain risks tied to the regional conflict. Market volatility has surged, with bond yields rising and stock indices fluctuating as investors reassess risk exposure in response to the shifting economic landscape. Analysts warn prolonged instability could force the Fed to prioritize inflation control over growth, potentially extending higher borrowing costs into late 2026.
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