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Interest rates were kept steady at a range of 3.50% to 3.75%, with officials flagging one expected rate cut by the end of the year amid the ongoing war in Iran.
US Federal Reserve Chairman Jerome Powell. (Reuters)
The US Federal Reserve held interest rates steady on Wednesday, while projecting higher inflation, steady unemployment and a single rate cut this year amid escalating tensions with the US-Israeli war with Iran in the Gulf.
Interest rates were kept steady at a range of 3.50% to 3.75%, with officials flagging one expected rate cut by the end of the year. This defied US President Donald Trump’s demand for a sharp drop in borrowing costs.
US stocks pared losses slightly after the release of the Fed’s policy statement and projections, with the S&P 500 index last down about 0.6% and the Nasdaq Composite down about 0.5%. The dollar pared its earlier gains, with the dollar index last up 0.27%. US Treasury yields also pared gains, with the 10-year yield last up at 4.214%, according to Reuters.
Inflation, as measured by the Fed’s preferred gauge, was expected to end the year at 2.7%, not far below its current rate and higher than the 2.4% projected in December, possible fallout from the spike in global oil prices that followed the start of the bombing campaign against Iran.
Iran War Implications ‘Uncertain’
“Implications of developments in the Middle East for the US economy are uncertain,” Federal Reserve Chairman Jerome Powell said in a policy statement that also noted ongoing stable unemployment.
“In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy,” he said, while declining to share specifics on how the war could affect the US economy.
Trump has repeatedly insulted and criticised Powell for not cutting rates, and in January, the Fed chair revealed that the US Justice Department had opened an investigation into him related to cost overruns on a building renovation project.
The Fed also released its quarterly summary of economic projections, expecting fourth-quarter GDP growth to come in at 2.4% year-on-year. Inflation was expected to end the year at 2.7%, not far below its current rate and higher than the 2.4% projected in December.
The decision to hold the policy rate steady was widely expected in financial markets, but the projections provide fresh information about how the US central bank is assessing the economic impact of a war that has disrupted global oil markets, with prices jumping to as high as $108.
(with inputs from agencies)
United States of America (USA)
March 19, 2026, 02:04 IST
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