- PIMCO warned that the Fed may consider more tightening as inflation risks continue rising.
- Goldman Sachs delayed expected Fed cuts as energy prices keep inflation elevated.
- Higher-for-longer interest rates continued adding pressure across crypto markets.
Pacific Investment Management Company (PIMCO) warned that the Federal Reserve may not be in a position to lower interest rates as inflation pressures continue rising following the escalation of the US-Iran conflict and the disruption of global energy markets. The warning came as financial institutions reassessed expectations for monetary policy after the Strait of Hormuz closure heightened concerns about higher oil prices and inflation persistence.
Dan Ivascyn, chief investment officer at PIMCO, said the inflation outlook has become more complicated for policymakers attempting to return inflation to the Federal Reserve’s 2% target. According to Ivascyn, tightening measures are already becoming more visible in Europe, the United Kingdom, and potentially Japan, while additional tightening in the United States should not be ruled out.
Ivascyn stated that reducing borrowing costs under current conditions could worsen inflation expectations and place additional pressure on longer-term interest rates. He said rate cuts could become “counter-productive” because of ongoing uncertainty surrounding inflation and inflation expectations, according to FT.
Asset Managers Reassess Fed Expectations
PIMCO’s comments followed similar remarks from Franklin Templeton Chief Executive Jenny Johnson, who said inflation could remain difficult for the Federal Reserve to contain. Johnson stated that the current inflation backdrop may limit the central bank’s ability to begin cutting rates in the near term.
Goldman Sachs also adjusted its policy outlook, pushing back expectations for the next Federal Reserve rate cuts to December 2026 and March 2027. The bank said higher energy prices linked to the geopolitical situation could keep core Personal Consumption Expenditures (PCE) inflation close to 3% throughout 2026.
The Federal Reserve has maintained its benchmark interest rate between 3.50% and 3.75% since January 2026 after implementing three rate cuts during 2025. Recent inflation data showed consumer prices increased by 0.9% month over month in March, while annual inflation reached 3.3%.
Crypto Markets Face Pressure From Higher Rate Outlook
The renewed possibility of a higher-for-longer interest rate environment has added pressure to risk-sensitive assets, including cryptocurrencies. Market participants continue monitoring the impact of inflation and interest rate expectations on liquidity conditions across digital asset markets.
Bitcoin traded at $80,892.24 at the time of reporting, according to CoinMarketCap data. The asset recorded a 24-hour trading volume of $32.47 billion and posted a daily gain of 0.11%. Bitcoin remained the largest cryptocurrency by market capitalization, with a total market value of approximately $1.62 trillion.
Related: What Tuesday’s CPI Could Do to the Bitcoin Price?
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