According to TD Securities strategists Oscar Munoz and Eli Nir, the Federal Reserve is expected to keep the Fed funds rate at 3.50–3.75% during the April Federal Open Market Committee (FOMC) meeting, with Chair Powell maintaining a neutral stance on future policy decisions [1]. The strategists note that the labor market remains balanced, but headline inflation has increased due to an oil shock, which is linked to ongoing uncertainty stemming from the Iran conflict [1].
The report highlights that the Department of Justice has dropped its investigation into Chair Powell, and this week could potentially be Powell's last FOMC meeting as chair, depending on whether he chooses to remain as governor once Warsh is confirmed [1]. Warsh’s recent Senate hearing did not provide clarity on near-term policy, and he reiterated criticism of the Fed’s inflation performance, balance-sheet size, and forward guidance [1].
TD Securities expects the Fed to keep policy on hold until September as it continues to assess the economic impact of the Iran situation. They forecast 50 basis points of easing in September and December 2026, with an additional 25 basis point cut in March 2027, ultimately bringing the Fed funds rate to 3.00% [1]. The strategists believe that if the economic impacts from Iran moderate, the Fed can resume easing in September, as underlying inflation is likely to improve once the effects of tariffs and oil prices subside [1].
The report also suggests that there is little inflation risk from the labor market, which will be further evidenced in the upcoming Q1 Employment Cost Index (ECI) release [1].
CONCLUSION
TD Securities anticipates the Federal Reserve will maintain its current policy rate in the near term due to uncertainty from the Iran conflict and recent inflation pressures. Easing is expected to resume in September if conditions stabilize, with a gradual path toward lower rates through 2027. Market participants should monitor developments in Iran and upcoming inflation data for further guidance.