Fed Holds Rates at 3.5%–3.75% as Powell Signals Readiness to Serve as Chair Pro Tempore Amid Iran War Oil Shock
On March 18, 2026 the Federal Reserve left the federal‑funds target at 3.5%–3.75%, and its new projections showed a split among officials — the median still points to one 2026 cut but an increasing number now expect no cuts as an Iran war–driven oil shock, rising gasoline and crude prices, firmer inflation readings (core PCE about 3.1%, PPI 3.4%) and weak jobs data (a 92,000 payroll decline, unemployment near 4.4%) complicate the outlook. Chair Jerome Powell said he would serve as “chairman pro tempore” after his term ends on May 15 if nominee Kevin Warsh is not confirmed and intends to remain on the Fed Board until the investigation into him is resolved, while Warsh’s confirmation is stalled amid DOJ scrutiny; the FOMC voted 11–1 with Gov. Stephen Miran dissenting.
📌 Key Facts
- On March 18, 2026 the Federal Reserve left the federal funds rate unchanged at 3.50%–3.75%, a second straight pause; the FOMC vote was 11–1 with Governor Stephen Miran the lone dissenter favoring a 25‑basis‑point cut.
- The Fed’s new Summary of Economic Projections (dot plot) still shows a median expectation of one 25‑bp rate cut in 2026, but officials are split: several pared back their expected cuts (some from two to one) and a growing number (seven, up from four in December) now project no cuts this year, reflecting heightened uncertainty from the Iran war energy shock and other risks.
- Policymakers raised their 2026 inflation outlook (headline and core) to roughly 2.7%, and the FOMC added language calling out uncertainty from “developments in the Middle East” while describing unemployment as “little changed in recent months.”
- Fresh economic data point to persistent inflation pressures and a weakening labor market: core PCE inflation was 3.1% year‑over‑year in January, the Producer Price Index accelerated to 3.4% YoY in February, employers cut 92,000 jobs in February, and unemployment rose to about 4.4% with virtually no net job growth over the prior six months.
- The Iran war (launched Feb. 28) and related threats to Gulf energy infrastructure have driven oil and fuel prices sharply higher — Brent briefly near $110/barrel (settling around $107), U.S. crude near $99 (settling about $96) — and national average gasoline has climbed to roughly $3.79/gal (up about $0.88 month‑over‑month), feeding into the Fed’s reassessment.
- Markets reacted negatively to the Fed decision and incoming inflation signals: on March 18 the S&P 500 fell ~1.1%, the Dow lost roughly 668 points (~1.4%), the Nasdaq declined about 1.1%, and the 10‑year Treasury yield rose to around 4.25% (from about 3.97 before the Iran war).
- Chair Jerome Powell said he intends to serve as “chairman pro tempore” after his term ends May 15 if nominee Kevin Warsh is not confirmed, and he indicated he will remain on the Fed Board until the criminal investigation into him is resolved; Warsh’s nomination is stalled in the Senate amid the DOJ probe (a federal judge recently quashed subpoenas tied to that probe, while prosecutors have said they will continue).
- Economists warn the upcoming dot plot and projections for 2026–27 will be closely watched — and could roil markets — as they reveal how policymakers are factoring in the oil shock, labor‑market weakening, and elevated inflation when deciding whether cuts projected for later in 2026 remain appropriate.
📊 Relevant Data
Black and Hispanic households experience higher and more volatile inflation rates because they allocate a larger share of their budgets to goods with volatile prices, such as energy, food, and transportation.
Breaking down inflation by race, age, parenthood, and more — Federal Reserve Bank of Minneapolis
Historical racist policies, such as redlining, have contributed to racial disparities in energy costs by leading to variations in housing quality, energy providers, and services for Black and Latino households.
Race, rates, and energy insecurity: exploring racial disparities in electricity costs and consumption in US utility service areas — Scientific Reports (Nature)
Black Americans are overrepresented in the active-duty US military, comprising 17.6% of personnel compared to 13.6% of the US population.
2023 Demographics Profile of the Military Community — Department of Defense (Military OneSource)
📊 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 (8)
Follow how coverage of this story developed over time
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