The latest minutes released by the Federal Reserve after its Federal Open Market Committee meeting on March 17-18 revealed significant divisions among policymakers regarding the future path of interest rates, with the Middle East conflict emerging as a key factor. The meeting decided to keep interest rates in the range of 3.5% to 3.75% by a vote of 11 to 1.

While most officials believed that interest rate cuts were possible this year assuming inflation remained under control, no one could accurately predict the specific impact of prolonged geopolitical conflicts on the U.S. economy. This uncertainty directly affected market expectations regarding liquidity. Although the last interest rate cut occurred on December 10, 2025, reducing rates by 25 basis points, subsequent actions would depend heavily on economic data.

According to Monitored by Woofun AI, market sentiment is shifting from simply anticipating interest rate cuts to evaluating various policy options, especially when inflation data deviates from targets, as some officials have explicitly discussed the need to raise interest rate ranges. In addition to inflation risks, downward pressures on the labor market cannot be ignored. The minutes noted that the current low rate of net job creation makes the employment situation vulnerable to negative shocks, increasing the likelihood of tighter monetary policy.

Data from CME Group’s FedWatch tool shows that, as of before the next meeting on April 28-29, the market believes there is a 75.6% chance that interest rates will remain unchanged on December 8, while the probability of a rate cut is only 20.4%, and the probability of a rate hike is 2.4%. Overall, although interest rate cuts are seen as a potential positive factor for stimulating speculative investment demand, the Federal Reserve’s policy space is being narrowed due to both geopolitical tensions and macroeconomic challenges. Investors should be cautious of the potential for liquidity tightening resulting from any policy shifts.