The US Federal Reserve held interest rates steady on Wednesday and projected higher inflation, steady unemployment and only a single rate cut for the year as officials took stock of economic risks from the U.S. and Israeli war with Iran.
New projections from U.S. central bank policymakers showed the Fed’s benchmark overnight interest rate would fall by just a quarter of a percentage point by the end of this year, with no hint of the timing of such a move. That view was unchanged from previous projections and remains out of step with President Donald Trump’s demand for a sharp drop in borrowing costs.
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.
“Implications of developments in the Middle East for the U.S. economy are uncertain,” the Fed said in a policy statement that also noted ongoing stable unemployment.
The new rate and economic projections showed the Fed, for now, largely looking through the oil shock, with policymakers still expecting to lower rates this year and anticipating inflation to be 2.2% by the end of 2027, near the central bank’s 2% target.
Notably, no policymakers saw rates needing to move higher by the end of this year, though one official anticipated a rate increase in 2027.
Economic growth was upgraded slightly, to 2.4% for 2026 versus 2.3% in December, and the unemployment rate projection was unchanged at 4.4%.
Fed Governor Stephen Miran continued his string of dissents, voting against the decision to maintain the policy rate in the current 3.50%-3.75% range in favor of a rate cut.
The decision to hold the policy rate steady was widely expected in financial markets, but the projections provide fresh information about how the U.S. central bank is assessing the economic impact of a war that has disrupted global oil markets.
Oil prices have jumped from below $80 a barrel to $108 ahead of the Fed’s policy decision, with U.S. gasoline prices also spiking and new inflation data showing wholesale prices rising faster than expected even before the conflict began.
Other than the reference to the war, the Fed’s new statement was little changed from the statement issued at the end of its January 27-28 meeting.
