GOOD MORNING.

You have probably heard the word stagflation in the news lately. It is worth taking a few minutes this Sunday morning to understand what it means, why it matters specifically for retirees, and what your options actually are.

Stagflation is when inflation rises at the same time economic growth slows or stalls. The two usually move in opposite directions. When the economy runs hot, prices rise. When it cools, prices settle. Stagflation is the exception, and it is particularly hard on people living on fixed or near-fixed income because prices keep going up while everything else is weakening.

The Federal Reserve is designed to fight one problem at a time. Its two jobs are to keep prices stable and to keep people employed. Usually those goals point in the same direction. Right now, the energy shock from the Iran war is pushing those two goals into direct conflict. BlackRock's Rick Rieder framed the problem clearly: this is a supply shock, not demand-driven inflation, which from a monetary policy perspective makes a very significant difference because a supply shock reduces demand, consumption, and ultimately growth. In plain English, prices are rising not because Americans are spending too freely, but because oil is being cut off from global markets. Raising interest rates to fight that kind of inflation would slow an already fragile economy without actually solving anything.

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The Fed held its target rate steady at 3.50% to 3.75% at its March 18 meeting, its second straight hold, and its updated projections still show just one rate cut expected in all of 2026. But those projections were made before the latest escalation in Trump's address to the nation and before inflation tracking data started showing sharper increases. Markets have now priced in zero rate cuts for the rest of the year, with Morgan Stanley citing a hawkish Fed and rising inflation risks.

And the situation may get more complicated. Fed Chair Jerome Powell's term as chair expires in May, and he has said he plans to serve on a temporary basis if his nominated successor, Kevin Warsh, is not confirmed in time. While many investors expect Warsh to take a somewhat more dovish approach once confirmed, a new Fed chair may need time to build consensus with the other committee members, introducing a degree of policy uncertainty at a moment when the economic outlook is already in flux.

Two former regional Fed bank presidents said they expect the FOMC to keep rates steady for the foreseeable future. Loretta Mester, former president of the Cleveland Fed, noted that the Fed "won't take hiking rates off the table," and added that holding rates steady as inflation rises would effectively be a more accommodative policy, which could push the committee to act.

The practical takeaway: rates are likely to stay higher longer than most people expected at the start of this year. That is not all bad news for savers. But it does create a specific planning question around when and how to lock in rates before the picture changes.

Fed Chair Powell's term expires on May 15, 2026. Kevin Warsh has been nominated as his replacement, but the confirmation timeline remains uncertain. The transition comes at one of the most complicated moments for monetary policy in decades. A Northwestern University economist noted that the key variables to watch are whether oil prices stay elevated for an extended period and how the Federal Reserve responds, drawing a direct comparison to the 1970s, when the Fed cut interest rates to fight the recession caused by the oil shock and ended up fueling inflation further. Who leads the Fed over the next 12 months, and what philosophy they bring to it, will have a real effect on interest rates, bond yields, and what you earn on savings accounts and CDs.

Given the expected path of Fed policy, investment strategists see opportunities in the belly of the yield curve, managing interest-rate risk with bond laddering and seeking higher income outside of core bonds. Bond laddering is a strategy of spreading purchases across different maturity dates so that some bonds are always coming due and can be reinvested at current rates. If rates stay elevated or rise, your ladder keeps reinvesting at better yields. If rates eventually fall, the bonds you locked in earlier continue paying the higher rate. For retirees who depend on income, a ladder built over the next few months, while rates are still relatively high, is one of the more sensible approaches available. This is worth a specific conversation with your advisor sooner rather than later.

The FOMC's next scheduled meeting is April 28-29. Markets will be watching whether inflation data and energy prices begin to cool, and whether the labor market weakens further, as those factors will shape whether the Fed can move from holding rates steady to cutting later in the year. By the time of that meeting, the official March CPI will have been published, the April jobs report will be days away, and the war with Iran will be entering its third month. Any surprise, in either direction, on inflation or employment between now and then will set the tone for the meeting and ripple through bond prices, CD rates, and income-focused portfolios. Put April 28 on your calendar. The statement that follows will be one of the clearest signals of the year about where rates are headed.

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