Fed Holds Rates at 3.5%–3.75% as Powell Cites Iran War Uncertainty and Markets Slash 2026 Rate‑Cut Odds
The Federal Reserve left the federal funds rate at 3.50%–3.75% on March 18, marking a second consecutive pause, with Chair Jerome Powell citing heightened uncertainty from the Iran war and energy‑driven inflation—core PCE is around 3.1%, PPI accelerated, gasoline and oil prices spiked, and payrolls showed a 92,000 decline with unemployment at 4.4%. Markets sharply cut odds of 2026 rate reductions (CME pricing near a 75% chance of no cuts), several officials shifted their dot‑plot projections toward fewer or no cuts even as the SEP median still shows one 25‑bp cut, and Powell said he would stay on as chair pro tempore until a successor is confirmed amid a stalled nomination.
📌 Key Facts
- On March 18, 2026 the Federal Open Market Committee held the federal funds target range at 3.50%–3.75% (a second straight pause); the vote was 11–1, with Governor Stephen Miran dissenting in favor of a 25‑bp cut.
- Policymakers pointed to heightened uncertainty from the Iran war and related oil‑price volatility as a central driver of their stance; Chair Jerome Powell repeatedly described the outlook as uncertain (“we don’t know”) and the FOMC added language citing 'developments in the Middle East.'
- The Fed’s new Summary of Economic Projections/dot plot left the median path showing one 25‑bp cut in 2026 (unchanged from December) but many officials shifted toward fewer cuts (the number projecting no cuts rose), while markets sharply reduced odds of 2026 easing (CME FedWatch showed roughly a 75% probability of no cuts); the re‑pricing pushed the 10‑year Treasury yield higher and U.S. stocks fell (S&P 500 ~‑1.1%, Dow ~‑1.4%, Nasdaq ~‑1.1%).
- Inflation readings and Fed forecasts strengthened: core PCE accelerated to about 3.1% year‑over‑year in January, U.S. producer prices rose 3.4% YoY in February, and the Fed raised its 2026 headline and core inflation projections to roughly 2.7% (from ~2.4–2.5).
- Labor market data showed signs of cooling: employers cut about 92,000 jobs in February, unemployment rose to 4.4%, and revisions left virtually no net job growth over the prior six months; Powell acknowledged private‑sector job creation has effectively stalled even as inflation remains above target.
- Energy costs jumped after the Iran war: Brent crude briefly hit about $109.95/barrel (settled ~ $107.38), U.S. crude neared $99 (settled ~ $96.32), and national average gasoline rose to $3.79/gal (up ~$0.88 month‑over‑month), amplifying near‑term inflation risks.
- Political and governance uncertainty surrounds the Fed: Powell said he intends to remain as 'chairman pro tempore' or stay on the Fed Board until a successor is confirmed and the DOJ criminal investigation into him is resolved; Kevin Warsh’s nomination is stalled (Sen. Thom Tillis is blocking confirmation) after a judge quashed DOJ subpoenas related to the probe.
📊 Relevant Data
In February 2026, the unemployment rate for Black Americans was 7.7%, compared to 3.7% for White Americans, 5.2% for Hispanic Americans, and 4.8% for Asian Americans; Black Americans comprise about 13.6% of the U.S. population, White Americans about 60%, Hispanic Americans about 19%, and Asian Americans about 6%.
February 2026 Jobs Day Analysis — Joint Center
Black households in majority-Black census tracts spend 5.1% of their income on energy, compared to the national average of 3.2%, with Black and Latino households paying 13-18% more per square foot for energy than White households; this disparity is linked to historical redlining affecting housing quality and energy efficiency.
Black families pay more to keep their houses warm than average — Phys.org
In 2025, the U.S. imported less than 10% of its oil from the Middle East, with 84.26% coming from the Western Hemisphere, though global oil prices are affected by disruptions in the Strait of Hormuz.
Mideast Accounts For Lowest Share Of U.S. Oil Imports Since 1970s — Forbes
📊 Analysis & Commentary (1)
Roundup #79: The revenge of macroeconomics
"The piece argues that the Iran war’s oil shock has brought macroeconomics back to the forefront—forcing forecasters to postpone Fed rate cuts, exposing the limits of one‑off fixes like SPR releases, and underlining that policymakers must reckon with large supply‑side geopolitical shocks rather than assume a smooth return to disinflation."
📰 Source Timeline (9)
Follow how coverage of this story developed over time
March 19, 2026
6:31 PM
3 reasons the Federal Reserve's interest rate pause is worrying investors
New information:
- CBS tallies Powell using the phrase 'we don’t know' at least 14 times and 'wait‑and‑see' four times in his press conference, underlining how unusually uncertain the Fed is about the economic outlook.
- Economists quoted say the Fed was 'blindsided' by recent inflation data and is 'paralyzed' or 'frozen' by the Iran conflict and the effective closure of the Strait of Hormuz, which they characterize as the number‑one economic risk.
- CME FedWatch data now show an almost 75% probability of no interest‑rate cuts in 2026, versus prior expectations of one or two cuts before this meeting.
- The article highlights that seven Fed officials now project no cuts in 2026, seven project one cut and five project two or more, emphasizing how divided the FOMC has become.
- Powell acknowledges that private‑sector job creation has effectively stalled even as unemployment stands at 4.4%, spotlighting a softer labor market that still coexists with above‑target inflation and rising energy prices driven by the Iran war.
March 18, 2026
7:51 PM
U.S. stocks sink on worries about inflation as gold falls below $5,000 per ounce
New information:
- On March 18, 2026, the S&P 500 fell about 1.1%, the Dow Jones Industrial Average dropped roughly 668 points (about 1.4%), and the Nasdaq Composite declined about 1.1% following the Fed’s decision and new inflation data.
- The latest U.S. wholesale inflation reading showed producer prices accelerating to 3.4% year‑over‑year, indicating inflation pressures were worsening even before the Iran war’s oil spike.
- Brent crude oil briefly hit $109.95 per barrel and settled at $107.38, while U.S. benchmark crude nearly reached $99 before settling at $96.32, with the article tying the spike directly to Iran war disruptions and Iranian threats against Gulf state energy infrastructure.
- The Fed voted 11–1 to keep rates unchanged, with only one official favoring a cut, and Powell emphasized heightened uncertainty about oil prices and tariffs, saying, “We just don’t know.”
- The article reports that several Fed officials shifted their internal projections from two cuts in 2026 to one, even as the median projection still shows one cut, contributing to a rise in the 10‑year Treasury yield to 4.25% from 4.20% the prior day and 3.97% before the Iran war.
7:22 PM
Fed keeps rates on hold, Powell says he will remain in place until successor confirmed
New information:
- Jerome Powell said he intends to serve as 'chairman pro tempore' of the Federal Reserve after his term ends on May 15 if nominee Kevin Warsh has not been confirmed.
- Powell stated he has 'no intention of leaving the Board' until the criminal investigation into him is 'well and truly over with transparency and finality.'
- Sen. Thom Tillis is formally blocking Warsh’s confirmation until the Powell investigation is resolved; Powell, Tillis and a federal judge all view the probe as a pretext to pressure Powell to cut rates.
- U.S. Attorney Jeanine Pirro has vowed to continue the investigation despite a federal judge’s scathing ruling quashing DOJ subpoenas of the Fed.
- New FOMC projections show 12 Fed officials expect at least one rate cut in 2026, while seven now project no cuts this year, up from four in December.
- The FOMC added language highlighting uncertainty from 'developments in the Middle East' and updated its description of unemployment from 'showing signs of stabilization' to 'little changed in recent months.'
- Fed governor Stephen Miran was the lone dissent, favoring a 0.25 percentage point rate cut.
6:28 PM
Federal Reserve holds interest rates steady, citing economic uncertainty
New information:
- FOMC on March 18, 2026 left the federal funds rate unchanged at a 3.5%–3.75% target range, marking a second straight pause this year.
- The Fed’s new Summary of Economic Projections still shows one 0.25‑point rate cut in 2026, unchanged from December, signaling policymakers expect the Iran war energy shock to be transitory enough to resume cuts later.
- The Fed raised its 2026 headline and core inflation projections to 2.7% (from 2.4% and 2.5% respectively).
- The article notes February’s Producer Price Index rose 3.4% year‑over‑year, the hottest in a year, suggesting inflation was firming even before the Iran conflict hit energy prices.
- The piece underscores that the U.S. lost 92,000 jobs in February and highlights that Powell will face questions about both the energy shock and his looming May term end with Kevin Warsh’s stalled nomination.
6:07 PM
Federal Reserve announces it will hold interest rates steady
New information:
- CBS piece confirms, in a separate source, that the Fed has held the federal funds rate at 3.5%–3.75%.
- No additional detail beyond the bare decision and rate range is provided in this clip compared with the existing multi‑source coverage that already includes the same rate range and date.
9:00 AM
The Federal Reserve is facing tough choices as the economy faces deep uncertainty
New information:
- Labor Department data show U.S. employers cut 92,000 jobs in February, with unemployment rising to 4.4% and revisions leaving the economy with virtually no net job growth over the last six months.
- January inflation on the Fed’s preferred measure is 3.1%, still well above the 2% target, and Fed officials had previously projected 2.5% inflation and 4.4% unemployment by year‑end before the Iran war shock.
- A federal judge recently quashed two DOJ subpoenas to the Federal Reserve, calling them part of an improper harassment campaign to force Powell and colleagues to cut rates, and Sen. Thom Tillis is blocking Kevin Warsh’s confirmation over DOJ’s refusal to drop the criminal probe.
- Jerome Powell’s term as chair ends in May, but because Warsh is stalled, Powell could end up remaining as chair into the summer and has the option to stay on the Fed Board until 2028, which analysts frame as part of his effort to defend Fed independence.
4:51 AM
Federal Reserve could signal no interest rate cuts this year in wake of Iran war
New information:
- Fed officials are considering altering their projection from one rate cut in 2026 to zero in the new quarterly Summary of Economic Projections.
- The article reports the policy rate is almost certain to be held at about 3.6% for the second consecutive meeting.
- AAA data cited in the piece put national average gasoline at $3.79 per gallon as of Tuesday, up $0.88 from a month earlier, and the article notes this Iran war–driven spike will likely push the Fed to raise its inflation forecast, potentially to around 3% even by late 2026.
- The story highlights that the Iran war, launched Feb. 28 by the Trump administration, is a central reason the Fed now faces the worst‑case combination of higher inflation and a possible rise in unemployment.
- It notes this is one of Powell’s last meetings as chair, with his term ending May 15 and his replacement, Kevin Warsh, stalled in the Senate over a DOJ investigation into Powell that recently saw subpoenas quashed by a judge.
March 17, 2026
3:56 PM
New economic projections signal a tricky Federal Reserve path
New information:
- Axios reports that the Fed’s new Summary of Economic Projections and dot plot, due Wednesday, will be the first for 2026 and will show how policymakers are factoring in the Iran war energy shock alongside already hot inflation.
- Pantheon Macro economist Sam Tombs expects the dot plot to still show a bias toward easing in 2026 and 2027, but warns markets could react sharply if the median Fed official now projects no rate cuts this year.
- Axios notes that core PCE inflation accelerated to 3.1% year‑over‑year in January from 2.8% in November, and that revised jobs data imply essentially no net hiring in December or February, raising doubts about Jerome Powell’s earlier "low‑hire, low‑fire" labor-market characterization.
March 16, 2026