Fed Chair Jerome Powell said he will continue leading the central bank if his successor is not confirmed by May|@federalreserve|X
The Federal Reserve kept interest rates unchanged on Wednesday, citing uncertainty from “developments in the Middle East” prompted by the Iran war.
The war makes it harder for the Fed to balance inflation and the job market.
Policymakers voted 11-1 to hold the benchmark rate at 3.5%–3.75%, marking a second straight pause.
Fed Chair Jerome Powell said the central bank is in a neutral position that neither boosts nor slows growth. This leaves little room to cut rates unless the economy weakens.
While 12 of 19 officials still expect at least one rate cut this year, Powell warned that those projections are uncertain.
Markets reacted negatively. The S&P 500 fell 1.4%, while the 10-year Treasury yield rose to 4.256%.
Inflation also remains sticky. The Fed’s preferred gauge climbed to 3.1% in January, above its 2% target. Rising costs in services like healthcare and insurance continue to pressure households.
The Iran conflict has increased uncertainty, especially in oil prices. Analysts warn that higher energy costs could push inflation up while weakening growth, making policy decisions harder.
Although there’s still a lot of uncertainty, officials believe interest rates will go down. Their forecast shows one cut this year and another in 2027, but the timing is still uncertain.
Meanwhile, Powell is set to step down as Fed chair at the end of his term in May.
After attacking Powell on rates, Trump chose Kevin Warsh as his successor, but Senator Thom Tillis has vowed to block the pick pending a DOJ probe into Powell.
The Fed Chair said he will continue leading the bank till a successor is confirmed, serving in an interim capacity if required. He also confirmed he will remain on the Board of Governors until 2028.