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Wed, 18 Mar 2026

Wed, 18 Mar 2026 US holds interest rates as Iran war triggers inflation fears

The US central bank is moving cautiously, despite pressure from the president to cut interest rates.
The US Federal Reserve has decided to keep interest rates steady at 3.5%-3.75%, despite pressure from President Donald Trump to cut borrowing costs. This decision was expected, but the ongoing war with Iran and its impact on oil prices has added uncertainty to the economic outlook. The Fed's policymakers are cautious about cutting interest rates, as they face a combination of rising inflation and mixed signals from the job market. Analysts say that the war in Iran has reduced the likelihood of an interest rate cut happening this year, pushing back the expected timeline for a potential reduction. The majority of Fed board members still expect to lower interest rates at least once this year, but forecasts show that some members now predict rates could fall below 3%. Federal Reserve Chairman Jerome Powell noted that it's too soon to say how the Iran war will affect inflation, and that future rate cuts depend on whether inflation continues to decline. The Fed typically lowers borrowing costs when unemployment rises, but the economic picture has become increasingly complicated due to factors like tariffs and abrupt policy changes. The ongoing conflict with Iran has led to a spike in oil prices, which is expected to drive up gas prices and contribute to higher inflation. However, it also risks slowing down the economy as households have less money to spend on other things. The Fed's latest forecasts show that inflation is expected to end the year at 2.7%, up from previous predictions of 2.4%. The unemployment rate is forecasted to remain steady at 4.4%.