The Federal Reserve left interest rates untouched on Wednesday at its first policy meeting under new Chair Kevin Warsh, although some officials estimated an increase in the benchmark rate this year. The Fed’s dot plot, which displays where policymakers believe interest rates are heading, indicated that officials were largely split on whether policy should be tightened to counter oil-driven inflation. Nine officials said they expect at least one rate hike by the end of 2026 — accounting for just under half of the Fed’s governors and regional bank presidents. Warsh told reporters at a press conference that he abstained from making a rate forecast. Also on Wednesday, the central bank removed language from its post-meeting statement that had previously suggested its next rate decision was more likely to be a cut, not a hike.

As markets price in hopes that oil will begin moving freely through the Strait of Hormuz, central bankers around the world face a challenging crossroads this summer. They could raise borrowing costs to head off inflation spreading beyond the energy sector, or they could back a wait-and-see approach in anticipation that price pressures might subside on their own. Major central banks have thus far taken different paths in navigating the oil shock. On the heels of last week’s hike from the European Central Bank, the Bank of Japan raised rates to a 31-year high on Tuesday. However, the Bank of England held rates steady on Thursday, as policymakers balance recent inflation against softer economic indicators.

Future rate moves would carry implications for business and consumer borrowing, potentially altering the macro outlook. Coming off a rise in mortgage rates and a period of repricing, a new cycle is already taking shape in real estate. PGIM explores the real estate opportunities emerging amid improving market activity, constrained supply and resilient occupancy.