<div id="readability-page-1"><div id="ArticleBody-InlineImage-108279906"><div><div><p>A trader works, as a screen broadcasts a press conference by U.S. Federal Reserve Chair Jerome Powell following the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 18, 2026.</p><p>Brendan McDermid | Reuters</p></div></div></div><div><p>Traders are entertaining the possibility of an interest rate cut by the end of the year now that the U.S. and Iran have agreed to a cease fire.</p><p>Odds for a reduction jumped Wednesday morning, hitting about 43%, according to the CME Group's FedWatch tool, which uses 30-day fed funds futures contracts to compute market expectations for moves by the Federal Reserve. </p><p>Market pricing is implying a 3.5% rate in December for the overnight borrowing benchmark, compared to the current effective level of 3.64%.</p><p>Prior to the announcement, market-implied odds for a cut were just 14%.</p><p>Traders had expected the Fed would be hesitant to cut this year as the Iran conflict had sent energy prices skyrocketing, threatening the central bank's efforts to get inflation back to its 2% goal. Previous to that, markets had expected multiple cuts this year in an effort to shore up the plodding labor market.</p><p>With at least a fragile peace in Iran, sentiment began tilting back toward the probability for a cut.</p><p>&#34;The market is now discounting a clear skew to one cut from the Fed this year,&#34; Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note. &#34;Assuming a flawed deal likely will be reached, this repricing has more to go, with the looming inflation shock now much less likely to threaten inflation expectations.&#34;</p><p>Guha sees rate cuts in play for the Fed's global peers including the Bank of England, European Central bank and Bank of Japan.</p><p>In the U.S., markets this week will get data that will provide two perspectives on inflation.</p><p>The Commerce Department on Thursday will release the personal consumption expenditures price index, the Fed's preferred gauge, that will show where inflation was in February, prior to the Middle East war. Then on Friday, the Bureau of Labor Statistics will release the consumer price index for March, which will reflect the price impact from the hostilities.</p><p>Economists expect the PCE report to show headline inflation at 3% and core, which excludes food and energy, at 2.8%, according to the Dow Jones consensus. For the CPI, the respective readings for March are pegged at 3.3% and 2.7%, with the all-items level reflecting the war-induced energy price increases.</p><p>Guha stressed that the chances for a lasting peace with Iran are still in flux, and said he expects generally cautious tones from policymakers in coming months</p><p>&#34;Then, provided that incoming information is reassuring, will shift back more dovish potentially from the late summer onwards, with scope for one, possibly two cuts later in the year,&#34; he said.</p></div><div><p>Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.</p></div></div>

The US-Iran talks are about to be held in Islamabad, the capital of Pakistan. Pakistan has activated a red alert, deploying over 10,000 military and police personnel to tightly control key areas and ensure the security of the talks. Do you think this crucial meeting can ease tensions in the Middle East?

<p>The US-Iran talks are about to be held in Islamabad, the capital of Pakistan. Pakistan has activated a red alert, deploying over 10,000 military and police personnel to tightly control key areas and ensure the security of the talks. Do you think this crucial meeting can ease tensions in the Middle East?</p>

With US-Iran negotiations imminent, where is the situation in the Middle East headed?

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<p>Traders are increasingly optimistic about a potential interest rate cut by the Federal Reserve this year, with odds rising to 43% following a ceasefire agreement between the U.S. and Iran. This marks a significant increase from just 14% prior to the announcement. Market expectations suggest a reduction in the overnight borrowing benchmark to 3.5% by December. Analysts anticipate that the upcoming inflation data will influence the Fed's decision, with cautious optimism for future rate cuts if economic conditions remain stable.</p>

- Traders are now considering a potential interest rate cut by the Federal Reserve by the end of 2026, following a ceasefire between the U.S. and Iran.  
- The odds for such a cut have increased to approximately 43%, compared to just 14% before the announcement, with expectations for a 3.5% rate in December.  
- Upcoming inflation data will be crucial in shaping future Fed policies, with economists projecting headline inflation at 3% for February and 3.3% for March, amid concerns over energy prices influenced by the conflict.

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Markets shift back towards potential Fed rate cut this year with Iran ceasefire in place