Policymakers cite rising oil prices and uncertainty while maintaining cautious stance on future cuts.
By yourNEWS Media Newsroom
The Federal Reserve left interest rates unchanged on March 18 for a second consecutive meeting, as policymakers assess the economic impact of rising energy prices tied to the ongoing conflict involving Iran.
The Federal Open Market Committee voted 11–1 to maintain the benchmark federal funds rate at a range of 3.5 percent to 3.75 percent. Fed Governor Stephen Miran cast the lone dissent, favoring a quarter-point rate cut.
In its post-meeting statement, the central bank said the U.S. economy continues to expand at a “solid pace,” with stable unemployment and ongoing employment gains. However, officials emphasized heightened uncertainty surrounding the economic outlook, particularly due to developments in the Middle East.
“Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain,” the committee said.
During a press conference, Federal Reserve Chair Jerome Powell said it is “too soon to know” the full effects of the conflict, noting that recent increases in inflation expectations are likely tied to higher oil prices resulting from supply disruptions.
“Near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices,” Powell said.
He added that the United States’ status as a net energy exporter could help offset some economic impacts, as higher prices may boost domestic energy production and corporate activity.
“We’re a net exporter of energy,” Powell said, noting that increased profitability could lead to expanded drilling and investment.
Despite those factors, Powell acknowledged the central bank faces a “difficult situation” in balancing inflation risks with potential labor market weakness.
The Federal Reserve maintained its outlook for one rate cut this year, according to updated projections. The median forecast places the policy rate at approximately 3.4 percent by year’s end. However, seven of the 19 policymakers expect no rate changes in 2026.
Economic forecasts were revised slightly higher. Real gross domestic product growth is now projected at 2.4 percent, up from 2.3 percent, while the Personal Consumption Expenditures Price Index—the Fed’s preferred inflation measure—is expected to reach 2.7 percent, up from 2.4 percent. Core PCE inflation was also revised higher to 2.7 percent.
Recent data show mixed signals across the economy. The Producer Price Index rose 0.7 percent in February, exceeding expectations, while core producer prices increased 0.5 percent. Meanwhile, fourth-quarter GDP growth was revised down to 0.7 percent, retail sales declined 0.2 percent in January, and durable goods orders were flat.
Labor market indicators also softened, with the economy losing 92,000 jobs in February after adding 126,000 in January.
Financial markets have adjusted expectations for rate cuts, with investors now anticipating a single quarter-point reduction later in the year, potentially in December.
President Donald Trump called for immediate rate cuts, criticizing the Federal Reserve’s pace of action in a March 18 statement.
The latest meeting marks Powell’s second-to-last as Federal Reserve chair before his term concludes in May, though he is expected to remain on the Board of Governors beyond that date.
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