The Federal Reserve is expected to hold its benchmark interest rate steady at 3.5%-3.75% when it concludes its March 18 meeting. Policymakers confront a deteriorating economic backdrop: February’s payroll report showed a loss of 92,000 jobs, unemployment rose back to 4.4%, and core PCE inflation hit 3.1% - its highest in over a year.
Iran’s control of the Strait of Hormuz has halted most oil shipments, sending prices soaring. That supply shock threatens to push U.S. inflation higher while weighing on growth - reviving stagflation concerns. GDP growth for Q4 2025 was revised down to 0.7%, from 1.4%.
Boston College economist Brian Bethune called the confluence of oil shocks and tariffs the Fed’s ‘worst nightmare’: upward pressure on prices, downward pressure on employment. SoFi’s Liz Thomas noted the Fed lacks tools to simultaneously combat inflation and job losses.
Rate cuts are now anticipated in June and September - but not before the March decision, which may feature dissent from Governors Miran and Waller. The meeting will also release the FOMC’s Summary of Economic Projections.
Chair Jerome Powell’s term ends in May. His successor, Kevin Warsh, remains unconfirmed after Sen. Thom Tillis blocked Senate action pending resolution of a DOJ investigation - which a federal judge recently dismissed as ‘pretextual.’ Another legal cloud hangs over Governor Lisa Cook, whose firing attempt by Trump awaits a Supreme Court ruling.