Fed seen holding rates as Iran war clouds outlook

The Federal Reserve is widely expected to hold interest rates steady at 3.50% to 3.75% at its March meeting as the Iran conflict reshapes the macroeconomic outlook.

Rising oil prices driven by the war are increasing inflation risks, prompting economists and traders to scale back expectations for rate cuts in 2026.

“We don’t think there’s going to be any change at this meeting,”

Said Vanguard senior US economist, Josh Hirt.

Analysts say the Fed is likely to remain cautious in the near term, as it assesses how higher energy costs filter into broader inflation and economic growth.

“This leaves the FOMC with little choice but to remain on hold until it is evident whether growth or inflation is damaged more significantly,”

Said Natixis chief US economist, Christopher Hodge.

Market pricing has shifted sharply, with expectations for two rate cuts in 2026 reduced to just one, as traders respond to persistent inflation and geopolitical uncertainty.

Looking ahead, policymakers are expected to maintain flexibility, with some analysts suggesting the Fed could still cut rates more aggressively if economic conditions weaken significantly.