The Federal Reserve has kept interest rates unchanged, while signalling it still expects to lower borrowing costs later this year despite renewed inflation risks linked to rising energy prices. Policymakers voted 11–1 to maintain the benchmark federal funds rate in a range of 3.5% to 3.75%. It marks the second consecutive meeting at which rates have been held steady.
In updated quarterly projections, 12 of the 19 officials indicated they expect at least one rate cut before the end of the year, unchanged from forecasts made in December. However, some policymakers now anticipate fewer reductions overall, while one projected a rate increase in 2027.
The decision comes as higher energy prices, partly driven by the ongoing conflict involving Iran, risk complicating efforts to bring inflation back under control after several years above target.
Economists say central banks typically try to look through temporary “supply shocks”, where weaker growth and higher inflation tend to offset one another. The Federal Reserve adopted a similar approach last year during disruptions linked to global supply chains.
However, that strategy depends on public confidence that inflation will eventually fall. After a prolonged period of elevated prices and repeated economic shocks, policymakers are increasingly wary that inflation expectations could become more difficult to manage.
Fed Meeting Outcome Today: Fed Holds Interest Rates as Iran War Sends Oil Prices Surging, Fuels Inflation Fears
