The US Federal Reserve has decided to keep its key interest rates unchanged at 3.5%–3.75%, as officials assess the impact of rising tensions in the Middle East and signs that economic growth is slowing.
This move was expected by markets, especially as oil price swings linked to the Iran conflict are raising fresh concerns about inflation. At the same time, some economic indicators suggest growth may be losing momentum.
The Fed has slightly raised its inflation outlook. It now expects its preferred inflation measure to reach 2.7% by the end of 2026, up from earlier estimates. Both headline and core inflation projections were revised higher due to possible price pressures from the ongoing conflict.
After cutting rates three times last year, the Fed has now taken a pause. Policymakers are trying to balance controlling inflation, which is still above the 2% target, with supporting jobs and economic growth.
Higher oil prices and supply disruptions could push inflation up further, making it harder for the Fed to consider rate cuts anytime soon.