Why $4 a gallon gas prices won’t trigger Fed interest rate hikes — and could lead to cuts

Skip Navigation Markets Business Investing Tech Politics Video Watchlist Investing Club PRO Livestream Menu Key Points Gasoline prices over $4 a gallon, part of a shock in the energy markets, might seem like a cue for the Fed to raise interest rates to head off inflation. At least for now, that looks like a bad bet. Investors instead expect the central bank to hold rates steady, or even pivot toward cuts later in the year as policymakers weigh the risk that higher energy prices will slow growth more than they fuel lasting inflation. "Central bankers' bark will be bigger than their bite" when it comes to fighting higher prices, wrote Rob Subbaraman, head of global macro research at Nomura. Gas prices are displayed at a Mobil gas station on March 30, 2026 in Pasadena, California. Mario Tama | Gasoline prices over $4 a gallon, part of an ongoing supply shock in the energy markets, might seem like a cue for the Federal Reserve to raise interest rates to head off inflation. At least for now, that looks like a bad bet. Investors instead expect the central bank to hold benchmark rates steady, or even pivot back toward cuts later in the year as policymakers weigh the risk that higher energy prices will slow growth more than they fuel lasting inflation. In market-moving remarks Monday, Fed Chair Jerome Powell signaled that raising rates now could be the wrong medicine for an economy already facing a softening labor backdrop and elevated recession concerns on Wall Street. …