US Fed holds rates steady, raises inflation forecast amid Iran war uncertainty
The U.S. Federal Reserve kept its benchmark interest rate unchanged at 3%–4%, defying President Donald Trump's demands for a cut despite spiking global energy prices that have reached US$108 per barrel due to the conflict in Iran and Israel. Fed Chair Jerome Powell noted an "uncertain" economic outlook driven by these geopolitical tensions, which are expected to worsen inflation while having limited impact on growth this year; consequently, officials raised their projections for rising price levels but still anticipate a single rate reduction later in 2026 as part of the current policy cycle.
Key Points
-
1The US Federal Reserve held interest rates unchanged for the second consecutive meeting, maintaining a target range of 3.5% to 3.75%.
-
2Officials projected higher inflation and raised their outlook due to rising oil prices driven by uncertainty surrounding war in Iran.
-
3Despite increased economic risks from energy markets, policymakers expect one rate cut later this year with limited impact on growth.
Developments
The Federal Reserve held interest rates steady at 3.50%-3.75%, with policymakers projecting one rate cut this year amid high uncertainty regarding economic impacts from a war between Israel and Iran, while traders bet on waiting until next year to begin cutting costs following the announcement that U.S. stocks slumped by about 1.4%.
The US Federal Reserve held interest rates steady at 3.5%–3.75%, projecting one rate cut this year while acknowledging high uncertainty regarding inflation and economic impacts from tensions with Iran, as oil prices rose above $108 per barrel ahead of the decision. Fed Chair Jerome Powell emphasized that policymakers are unsure about future effects but noted a shift toward fewer expected cuts among individual members compared to three months ago due to evolving risks in global markets.
The US Federal Reserve held interest rates steady at 3.5% to 3.75%, raising its inflation forecast for December 2026 from 2.4% to 2.7% due to the war in Iran and higher energy costs, while Fed Chair Jerome Powell refused President Trump's demand for a rate cut but pledged not to leave his board until an ongoing DOJ investigation is concluded.
The Federal Reserve kept interest rates unchanged at 3.5%-3.75% while projecting one rate cut this year and higher inflation in the near term due to ongoing US-Israeli tensions, though Chair Jerome Powell noted that progress on reducing those projections depends heavily on economic performance. The decision was not unanimous; Governor Stephen Miran cast a dissenting vote for an immediate quarter-point reduction during what is now his longest streak of back-to-back dissents since 2013.