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Grace O’Donnell · Editor, Special Projects
Updated 1 min read
The Federal Reserve kept interest rates unchanged in the 3.5%-3.75% range at the end of its two-day policy meeting on Wednesday, as widely expected.
Along with its second policy decision of the year, the Fed also published its first Summary of Economic Projections (SEP) for 2026, which showed that officials maintained a median forecast for one rate cut in 2026. In December, the median Federal Open Market Committee member also projected one rate cut this year.
Stocks fell on Wednesday after Fed Chair Jerome Powell underscored the uncertainty surrounding the oil shock during his press conference and said the US had not made as much progress on inflation as it had hoped.
Markets closely watched the press conference for clues on how the war in Iran might shift the Fed’s rate-cutting calculus. The recent spike in oil prices, driven by the Middle East conflict, has complicated the Fed’s picture, as inflation remains above the central bank’s 2% target and the labor market slows.
Here are the latest updates and analysis on the Fed’s policy decision.
LIVE 34 updates
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The Bank of England left interest rates on hold at 3.75%, as expected.
The decision comes as the war in Iran raised concerns that surging oil and gas prices could drive inflation higher, making it more complicated for central banks to deliver further easing.
London’s benchmark index (^FTSE) fell 2% after the decision, while the pound rose 0.2% against the US dollar (GBPUSD=X). In the US, stocks ground lower in premarket trading.
Later today, the European Central Bank is also expected to keep rates on hold at 2%.
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Job creation in the US has slowed to essentially zero, Federal Reserve Chair Jerome Powell said Wednesday. And although central bankers see some stability in the labor market, they remain concerned about the low level of job creation.
Yahoo Finance’s Emma Ockerman reports:
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On Wednesday, the Federal Reserve decided not to cut rates, extending its pause that began in 2026. But experts say more rate cuts could be on the table in 2026, with the median Fed official forecasting a cut in December.
When the Fed ultimately decides to lower rates, what does that mean for banking and borrowing?
Yahoo Finance’s Sarah C. Brady explains what you can expect after a rate cut from the Fed::
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The Fed held interest rates steady on Wednesday, but the consequences of the Middle East conflict could complicate the picture for the rest of the year.
“What the Iran war does for the Fed is it kind of delays, not denies, these rate cuts,” Morgan Stanley senior fixed income portfolio manager Andrew Szczurowki told Yahoo Finance on Tuesday (see video below).
“So I think that obviously we know oil’s been shooting up, we know that’s going to feed into headline inflation. Ultimately, I think the Fed’s going to look through that, but it’s going to take them some time. They want to make sure that there’s not kind of spill-on effects into the service sector, other parts of the goods sector.”
Szczurowki noted that the longer the uncertainty stemming from the war persists, the more pressure it could put on the labor market, and not just on consumer prices. He pointed out that companies may defer hiring plans as they wait to see how the war and artificial intelligence shape the business environment, putting downward pressure on the labor market.
As a result, the Fed may need to make a larger policy adjustment down the road.
“I think a year from now, … the Fed will be cutting more than the market’s pricing in,” Szczurowki said. “But I think in the short term, the Fed’s just going to be sitting on their hands.”
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Here are three key things that caught our eye from Wednesday’s FOMC statement and press
1. The Fed continues to wait and see what the war in the Middle East has in store for inflation pressures and growth. Fed Chair Powell signaled the Fed could delay rate cuts due to high uncertainty about the war’s duration and its economic implications.
2. Officials forecast slightly higher economic growth and hotter inflation this year in their quarterly Summary of Economic Projections.
3. Fed Chair Powell said he would stay at the Fed at least until the Department of Justice’s investigation concludes. If the incoming Fed chair, Kevin Warsh, is not yet confirmed, Powell said he would continue to serve as chair on a temporary basis until a new chair is confirmed.
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Stocks sold off on Wednesday following the Federal Reserve’s decision to hold rates steady, its first move since oil prices surged amid the war in Iran.
At the market close, the Dow Jones Industrial Average (^DJI) fell 1.6% for the day, with most of the selling occurring during the Fed’s post-decision press conference. Meanwhile, the benchmark S&P 500 (^GSPC) index and the tech-heavy Nasdaq Composite (^IXIC) dropped about 1.4%.
The Dow and S&P 500 gave up their gains for the past five days and recorded their lowest levels since November after Fed Chair Powell elevated inflation concerns in his presser.
The 10-year Treasury yield (^TNX) rose more than 5 basis points, and the 30-year (^TYX) was up about 3 basis points to 4.88%. The US dollar index (DX-Y.NYB) also moved above 100, pressuring trades in emerging markets and commodities.
Read more about the day’s market moves in stocks, bonds, oil, and more.
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Fed Chair Powell pushed back on the notion that the US economy is experiencing “stagflation” — a gloomy combination of rising prices, sluggish economic growth, and high unemployment.
Although he acknowledged that the Fed’s dual goals of price and labor market stability are in tension, he said that stagflation “is not the situation we’re in.”
“You know, when we use the term stagflation, I always have to point out that was a 1970s term at a time when unemployment was in double figures and inflation was really high and the misery index was super high,” Powell explained.
“That’s not the case right now,” he added. “We actually have unemployment really close to longer run normal, and we have inflation that’s one percentage point above [the Fed’s target]. … I would reserve the term stagflation for a much more serious set of circumstances.”
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Fed Chair Powell said that a “good number of people” on the Federal Open Market Committee are concerned about the low level of job creation over the past six months.
The government’s jobs report in January surprised to the upside, showing the US economy added around 126,000 jobs, while the report for February showed an unexpected loss of 92,000 jobs.
While factors like severe winter storms may have affected counting, Powell noted that the two months nearly canceled each other out. Changes in immigration, disruption from artificial intelligence, and other policies may be contributing to the low level of job creation — something the Fed is watching closely.
“You’ve got a sort of zero employment growth equilibrium,” Powell said. “Now that’s balance, OK, but, you know, I would say it does have a feel of downside risk, and it’s not a really comfortable balance.”
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Ahead of the Fed’s decision, there was much discussion about how seriously to take the Federal Reserve’s Summary of Economic Projections (SEP).
Federal Reserve Chair Jerome Powell said the 19 members of the committee had to “write something down,” but there is still a lot of uncertainty
“If we were ever going to skip an SEP, this would be a good one because we just don’t know,” Powell said during the FOMC press conference.
New Century Advisors chief economist Claudia Sahm argued on X that the baseline of forecasts should have been suspended due to lingering uncertainty about the war in Iran.
“Take it for what it is,” said Esther George, former president and CEO of the Federal Reserve Bank of Kansas City. “It is a very uncertain time, and the committee is not looking to, I think, put a stake in how they feel about the direction of the economy, certainly not as we’re looking at the situation in the Middle East right now.”
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Federal Reserve Chair Jerome Powell said Wednesday that he plans to serve as chair on a temporary basis if Kevin Warsh isn’t confirmed when his term expires in May.
That was in response to a question.
Anticipating questions that might follow on the various legal challenges facing the Fed and whether Powell will continue serving as a Board member through the end of his term in 2028, Powell said he won’t be leaving the board until those legal questions are resolved and that whether he’ll remain on the board is a decision he hasn’t made yet.
Powell, quoted at length:
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While the effects of the energy supply shock have been top of mind, Fed Chair Powell offered a reminder that the US is still working through tariff inflation as well.
“We’re well aware of the performance of inflation over the last few years and how a series of shocks have interrupted progress that we’ve made over time,” Powell said.
“The thing that’s really important that we see this year is progress on inflation through a reduction in goods inflation as the one-time effects on prices of tariffs … go through the economy,” Powell said.
He added that the Fed won’t be able to look through energy-driven inflation as transitory until it has “checked that box” of containing tariff inflation.
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Taking a measured tone on the impacts of the conflict roiling the Middle East, Fed Chair Jerome Powell said in his prepared remarks, “The implications of developments in the Middle East on the US economy are uncertain.”
In the near term, energy prices will push up headline inflation, but it’s still “too soon to know the scope and duration of the potential effects on the economy,” Powell said.
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The Fed’s headline forecasts get most of the attention, but the SEP also reveals the range of projections offered by Fed officials.
Not surprisingly, the range of what officials deem the appropriate path for rates this year is wide — at least one Fed official thinks we need to see four cuts in 2026.
But what really stands out to us is the outlook for the labor market.
Given the slowdown we’re seeing in hiring and the softness that appears to be spreading in some pockets of the white-collar workforce, that no Fed officials expect the unemployment rate to have a 5-handle this year is, frankly, a rosy outlook.
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Federal Reserve Chair Jerome Powell has started speaking at the FOMC press conference.
We’re listening for Powell’s comments on the effects of the war in Iran on inflation expectations, the job market, housing, and the path of monetary policy looking ahead.
Powell is likely to be somewhat reserved in his remarks, however, given that the Fed underscored uncertainty about the economic outlook in its policy statement.
Watch the press conference live below or here on YouTube.
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The Federal Open Market Committee’s policy statement that accompanied the rate decision showed minor changes from January’s statement.
Notably, the FOMC added a line about the war in the Middle East, stating that the implications of the conflict “are uncertain.” The Fed also changed how it characterized the unemployment rate, opting to describe it as “little changed” instead of showing “signs of stabilization.”
Here are the key changes, with additions bolded and subtractions in strikethrough text:
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The Federal Reserve on Wednesday said it expects to cut rates once in 2026 while officials anticipate faster economic growth and hotter inflation this year than previously forecast.
The central bank’s latest policy decision on Wednesday — which saw the Fed keep rates unchanged in a range of 3.5%-3.75% — also came alongside the release of the Fed’s latest Summary of Economic Projections (SEP). The SEP includes forecasts for growth, inflation, the labor market, and interest rates from members of the Federal Open Market Committee.
In December, the last time Fed officials published their outlooks, forecasts called for one 0.25% rate cut in 2026, followed by two rate cuts of the same size in 2027. Those forecasts were unchanged this month, and a new outlook for 2028 sees the Fed keeping rates steady in a 3%-3.25% range two years out.
Wednesday’s SEP showed that Fed officials now see inflation on both a headline and “core” basis standing at 2.7% at the end of this year. The Fed targets inflation that averages 2%. In December, the central bank expected core inflation — which strips out the more volatile costs of food and energy — to reach 2.5% by the end of 2026. Headline inflation, which includes all categories, was expected to reach 2.4% by the end of this year.
Economic growth forecasts also rose for 2026, with GDP now expected to grow 2.4% this year, up from a forecast for 2.3% growth as of December.
Notably, Fed officials don’t foresee considerable further weakening in the labor market, with the unemployment expected to remain at 4.4% at the end of this year.
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US equities ticked down slightly in the minutes after the Federal Reserve announced it would hold rates steady at a target range to 3.5% to 3.75%.
The S&P 500 (^GSPC) traded down by 0.6% on the session, while the blue chip-heavy Dow Jones Industrial Average (^DJI) lost 0.9%. The tech-exposed Nasdaq Composite (^IXIC) lost 0.5%.
Yields on 10-year Treasurys (^TNX) ticked up as investors priced in higher rates for longer, picking up 2.4 basis points on the session. The yield on -year Treasurys (^FVX) picked up 3.9 basis points.
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The Federal Reserve kept interest rates in the 3.5%-3.75% range on Wednesday at the conclusion of its March meeting. The decision was widely expected, as the Fed remains in wait-and-see mode amid a moderating labor market and sticky inflation above officials’ target.
In its Summary of Economic Projections, also known as the “dot plot”, Fed officials penciled in one cut for 2026.
Fed Chair Jerome Powell will take the lectern at 2:30 p.m. ET to offer remarks on the economy and monetary policy. Markets will be listening closely for commentary on inflation expectations, as central bankers around the world face a cloudier outlook from higher energy costs.
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Roughly 15 minutes out from what is going to be a closely watched Fed decision, even though the market has formed a consensus that rates will remain unchanged, oil prices are holding strong several dollars per barrel above where they opened Wednesday.
Futures on Brent crude (BZ=F), the international benchmark, are up roughly 3% from where they opened at 12 a.m. ET to trade above $104 per barrel. Those on US benchmark WTI crude (CL=F) are up 5% to trade above $97 per barrel.
The big question for the Fed is whether it sees the Middle Eastern energy crisis as a transitory shock to be “looked through” or as a legitimate, long-lasting shock that can meaningfully move up headline inflation, bleed into core inflation, and ultimately stunt growth down the line.
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