Interest Rate News: Second Quarter 2026

In Q1 2026, the Federal Open Market Committee kept the federal funds rate steady at 3.50%-3.75%, despite ongoing inflation and the impact of the U.S.–Iran conflict. March projections showed higher GDP growth and core inflation, with rate cuts expected only if inflation improves. Chair Jerome Powell emphasized that future changes hinge on inflation progress.

Market expectations for rate hikes shifted toward a steady rate scenario, with a 73% chance of no change by year-end. Geopolitical tensions and supply chain risks, especially from the Strait of Hormuz closure, have made borrowing rates volatile. Upcoming data and conflict developments will guide future monetary policy decisions.

Source: Bloomberg & Synovus, April 9, 2026

Federal Funds Rate Update

• The FOMC met twice in the first quarter. After each meeting, the committee held rates steady, keeping the federal funds target rate in the 3.50%-3.75% range. The January and March statement that accompanied the decision was little changed. The committee emphasized that inflation remains “somewhat elevated” and the unemployment rate has “been little changed in recent months.”
  
  
• At the March 18, 2026 meeting, the FOMC decided in a 11-1 vote to keep the policy rate unchanged with an effective range between 3.50%-3.75%. Federal Reserve Governor Miran dismissed the decision and voted for a .025% reduction. The March FOMC meeting was widely watched as it was the first meeting since the U.S. – Iran conflict began.
  
  
• Federal Reserve board members released their quarterly Summary of Economic Projections during the March meeting. Compared to the December projections, the average FOMC member projects higher GDP growth, an unchanged unemployment rate and higher core inflation. The average FOMC member continues to project just one 0.25% cut in 2026 and another in 2027.
  
  
• Following the meeting Jerome Powell stated “It is too soon to know the scope [of the Iran War] and duration of the potential effects on the economy,” and that “the rate forecast is conditional on the progress [of inflation] and if you don’t see that progress, you won’t see that rate cut.”
  
  
• After the Fed meeting, the market briefly priced in rate hikes for 2026, but those expectations were pulled back as a steady‑for‑longer scenario appears more likely. At this writing, the market currently assigns 73% probability that there will be no change to the Fed Funds Target Range before year-end 2026.
  
  
• Insight into the geopolitical conflict and data from Q2 2026 should provide additional clues to the future path and timing of monetary policy adjustments as the FOMC tries to determine how to manage energy-fueled inflation and a potentially resultant slowed economy.

Term Borrowing Rate Update

• The FOMC is responsible for monetary policy and influences short-term interest rates. However, multiple factors that are difficult to predict affect longer-term interest rates, including elevated geopolitical tensions and supply chain risk from the Strait of Hormuz closure as it’s a critical artery for global energy and goods flow.
  
  
• Although the Fed kept the effective federal funds rate constant throughout Q1 2026, short and longer-term borrowing rates remained volatile. The 10-year U.S. Treasury yield nearly reached 4.60%, which equates to a 40 basis point move higher off the recent lows. The Bankrate.com 30-year fixed national average mortgage rate settled around 6.50%.
  
  
• The 2-year U.S. Treasury yield jumped to a new range between 3.60%-4.00% throughout the quarter as the FOMC postpones a rate cut in 2026. This range appears to be the new normal, persisting through changing economic forecasts, fiscal policy shifts and equity market rallies and corrections.
  
  
• While past performance doesn’t indicate future results, borrowers shouldn’t assume term rates will be lower as the war in Iran de-escalates. Instead, they should consider taking advantage of known term rates that remain within historic ranges.

This “Interest Rates News Update” is a quarterly communication. Stay informed. Contact a Synovus Commercial Banker or stop by one of our local branches for more details.

Foster Olson is an Associate of Synovus’ Capital Markets-Derivatives. Olson’s focus is hedging rates.