What we covered here
• The Federal Reserve said Wednesday it is holding rates steady for the second time this year and projected one rate cut this year.
• Central bank officials met this week against a backdrop of war, an energy crisis, rising costs, a probe of the Fed chair and ongoing attacks on its independence.
• The conflict in the Middle East has created an energy price shock that could push up the cost of consumer goods and reignite the higher inflation the Fed has been trying to contain since 2022.
• Fed Chair Jerome Powell told reporters he will stay at the central bank until a new Fed chair is in place. A Republican senator is effectively blocking confirmation of President Donald Trump’s nominee, Kevin Warsh, until the DOJ drops its investigation.
Our live coverage of the Federal Reserve decision has ended. Read more about the Fed’s announcement here.
Dow tumbles more than 750 points to lowest level of the year
US stocks closed lower Wednesday as traders grappled with hotter-than-expected inflation data, spiking oil prices and a Federal Reserve that is content to hold interest rates steady.
The Dow closed lower by 768 points, or 1.63%, and hit its lowest level this year. The S&P 500 fell 1.36%, and the tech-heavy Nasdaq sank 1.46%.
Stocks took a step lower as Federal Reserve Chair Jerome Powell delivered remarks. Powell maintained a tempered view of the economy but discussed potential inflationary impacts of higher energy prices as well as tariffs.
“The bar is a little bit higher for cutting rates,” said Mike Dickson, head of research and quantitative strategies at Horizon Investments. “I think we knew that coming in, but we got that kind of confirmed from the comments today.”
Traders on Wednesday afternoon began pricing in no further rate cuts this year, according to CME FedWatch. And that’s despite the Fed’s Summary of Economic Projections penciling in one rate cut.
Treasury yields moved higher as traders recalibrated expectations for higher inflation. The US dollar index was up 0.6%.
Meanwhile, global oil prices moved higher: Brent crude, the international oil benchmark, rose 3.83% to $107.38 per barrel, its highest level since July 2022.
Our experts weighed in on the Fed meeting. Here's what they said
Stocks extend losses as Fed Chair Powell discusses inflation
US stocks dipped lower Wednesday afternoon as Federal Reserve Chair Jerome Powell delivered remarks.
The Dow was down 720 points, or 1.5%. The S&P 500 and tech-heavy Nasdaq each fell roughly 1.15%.
Stocks bounced around as Powell delivered his remarks and responded to questions. But stocks took a step lower as Powell discussed the Fed’s view of inflation, noting the potential for inflationary impacts from the Middle East conflict as well as some impacts from tariffs.
“The implications of events in the Middle East for the US economy are uncertain,” Powell said. “In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.”
Treasury yields ticked higher. The US dollar index was up 0.5%.
A rate hike isn't off the table
While Federal Reserve officials penciled in one rate cut this year, don’t take that to mean a rate hike is out of the question. (And maybe don’t even take that to mean a rate cut at all is happening.)
But with inflationary risks stemming from the war with Iran, more economists are beginning to wonder whether the Fed will have to hike rates to counteract it, as the Reserve Bank of Australia did earlier this week.
Fed Chair Jerome Powell declined to share what factors would need to be met for a rate hike to be considered. But if it gets to that point, Powell said, “We are prepared to do what needs to be done.”
Powell: “We worry a lot” about keeping inflation at 2% after five years of inflation
Federal Reserve Chair Jerome Powell stressed that the central bank is focused on bringing inflation down to 2%, the Fed’s target.
Over the past few years, the Fed has contended with several inflationary shocks, including the pandemic, tariffs and now higher oil prices due to the ongoing war with Iran, Powell said.
“It has been five years and we had the tariff shock, the pandemic, and now we have an energy shock of some size and duration. We don’t know what that will be,” he said. “You worry that is the kind of thing that can cause trouble for inflation expectations.”
“We worry a lot about that,” he added.
While inflation has cooled since its peak in 2022, it remains above the Fed’s target. The Personal Consumption Expenditures price index was up 2.8% in January.
Powell: "I would reserve the term 'stagflation' for a much more serious set of circumstances"
Concerns have been mounting that the US economy could be due to experience an ugly economic phenomenon: stagflation. That is, when economic growth significantly slows and inflation accelerates.
Those concerns are front and center since the war with Iran broke out, pushing energy prices higher while cracks in the labor market are widening. But Federal Reserve Chair Jerome Powell isn’t anything close to concerned about stagflation.
As he’s previously said, he thinks about stagflation in the context of the 1970s and 1980s, when the unemployment rate and inflation rate hit double digits.
“I would reserve the term stagflation for a much more serious set of circumstances. That is not the situation we’re in,” Powell told reporters on Wednesday.
Powell still bracing for higher prices because of tariffs
Federal Reserve Chair Jerome Powell believes American consumers have essentially only seen the tip of the iceberg when it comes to tariffs. Powell said it could take anywhere from nine months to a year for higher prices stemming from tariffs to work their way up to consumers.
But he repeated his prediction that these would be one-time price increases, rather than setting off a domino effect of higher prices. Once the full effect is felt, the good news, per Powell, is the pace of price increases will start to slow.
Powell says he has "no intention" of leaving the Fed while investigation is ongoing
Federal Reserve Chair Jerome Powell confirmed today that he would not leave his post as long as the Department of Justice criminal investigation is ongoing.
“I have no intention of leaving the board until the investigation is well and truly over with transparency and finality,” Powell said.
Late last year, the DOJ opened a criminal investigation into Powell, probing whether he misled Congress about the $2.5 billion renovation of the Fed’s Washington, DC, headquarters.
The investigation comes as President Donald Trump has openly criticized Powell for failing to cut interest rates more aggressively. Critics of the investigation say it is aimed at pressuring Powell to resign.
While Powell’s tenure as Fed chair technically ends in May, his term on the Fed Board of Governors ends in January 2028.
Powell said he has not made a decision about whether he would continue to serve on the board if the investigation ends.
“I will make that decision based on what I think is best for the institution and for the people we serve,” he said.
However, Powell did say that if Trump’s pick to replace him as Fed chair, Kevin Warsh, isn’t confirmed by the Senate by May, Powell would remain as Fed chair “pro tem” in the interim.
Inflation has started to tick back up
Inflation has cooled considerably from several years back, but prices are still rising faster than they typically should – in part because of President Donald Trump’s sweeping and steep tariffs.
However, for much of last year and through the first two months of 2026, low and falling gas prices as well as a continued wind-down of housing-related price hikes, have helped to keep overall inflation in check.
That dynamic is quickly changing as the war-induced oil shock sends energy and fuel prices sharply higher.
High gas prices hit people hard – especially folks with little wiggle room in their monthly budgets – and the oil shock could quickly spill over into costlier groceries and everyday goods and services.
“There’s never a good time for an adverse supply shock, but ideally the starting point would be low and stable inflation,” JPMorgan economists wrote in a note last Friday. “That will not be the case in this episode.”
The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures price index, remains above the 2% target rate and was up 2.8% in January (and reached 3.1%, when excluding food and energy prices).
A separate gauge, the widely used Consumer Price Index, showed that inflation was unchanged at 2.4% in February. (Housing-related prices, which have seen substantial disinflation, have a heavier weight in the CPI than the PCE).
Stocks slip as Fed holds rates steady
US stocks were lower after the Federal Reserve announced its decision to hold interest rates steady, matching expectations.
The Dow was down 470 points, or 1%. The S&P 500 and tech-heavy Nasdaq each fell 0.7%.
Stocks were already trading lower ahead of the Fed rate decision and moved slightly lower after the announcement matched expectations.
“Uncertainty about the economic outlook remains elevated,” the Fed said in a statement. “The implications of developments in the Middle East for the U.S. economy are uncertain.”
The Fed’s Summary of Economic Projections outlined one more rate cut before the end of 2026, similar to the prior projection in December.
Treasury yields fluctuated and the US dollar was little changed. Traders will now be attuned to Fed Chair Jerome Powell’s remarks at 2:30 p.m. ET.
Fed officials' economic projections imply short-lived disruptions from war with Iran
With no end in sight to the US-Israel war with Iran that’s prevented nearly all oil from leaving the Persian Gulf, pushing energy prices substantially higher, consumers and businesses are poised to get hit even harder.
Federal Reserve officials’ new economic projections seem to suggest they believe these disruptions could — more or less — be resolved by year’s end.
But bear in mind Fed officials don’t have anything close to a crystal ball and likely have no insights into how severe the war could be. That said, here’s how they foresee the economy performing this year per new projections submitted at this month’s monetary policy meeting.
- Inflation: 2.7% annual pace as measured by the Fed’s preferred inflation gauge, the Personal Consumption Expenditures price index. In December they predicted a markedly lower rate of 2.4%. The latest reading in February had PCE annual inflation at 2.8%.
- GDP: 2.4% inflation-adjusted annualized rate. In December they predicted 2.3% growth. As of the fourth quarter of last year, the economy was growing at a 0.7% rate.
- Unemployment rate: 4.4%, the same rate that was predicted in December. The latest jobs report has the unemployment rate at 4.4%.
Fed officials are still penciling in one cut this year
Despite the war with Iran, which has fueled inflationary concerns, Federal Reserve officials still believe one rate cut will occur this year. That’s the same prediction they made in December, well before the war broke out.
The latest interest rate prediction comes from the Fed’s Summary of Economic Projections, also known as the “dot plot.” While the 19 Fed officials who submitted forecasts had a fairly wide range of views on the optimal level of interest rates for this year, the median implies a quarter-point cut.
But bear in mind these are indeed projections and as officials learn more about how economic conditions play out, their views on where interest rates should be could change significantly.
The Fed’s latest policy statement acknowledged the conflict looming over the global economy, noting: “The implications of developments in the Middle East for the US economy are uncertain.”
Fed holds interest rates steady as officials brace for economic fallout of Iran war
The Federal Reserve on Wednesday kept interest rates unchanged as investors and policymakers brace for the economic fallout of America’s war with Iran.
Fed officials voted to leave their benchmark lending rate at a range of 3.5%-3.75% for the second consecutive meeting.
The Fed last year lowered rates three times in response to a weakening labor market, though officials have said in recent public speeches that the Middle East conflict is giving them some pause as they try to gauge its potential impact on inflation.
America’s rate setters remain in a difficult spot as they face the twin threats of higher inflation and a job market still on shaky footing.
The Fed didn't handle the last oil crisis too well
The Federal Reserve hasn’t confronted an oil shock this severe since the 1973 Arab-Israeli War, which triggered the notorious stagflation episode of that decade.
But America’s economy looks a lot different today and its central bank is unlikely to respond the way policymakers did half a century ago, when aggressive rate hikes pushed the economy into recession.
As the world’s largest oil-producing country, the United States is much less reliant on imported crude than it was during past energy crises.
Yet since oil trades on a global market, Americans have still been feeling the pinch at the pump. The war has also started to weigh on people’s expectations of where inflation is headed: The University of Michigan’s latest consumer survey, released Friday, showed that sentiment declined 2% this month from February, with consumers increasingly citing the war in their responses.
“There’s very little question that there is going to be an inflation effect” from the war with Iran, said Tani Fukui, senior director of economic and market strategy at MetLife Investment Management. “But how big it will be is still very much an open question.”
Read more here.
What's the Fed's big move if the war throws the economy into a recession or stagflation?
The Federal Reserve will be between a rock and a hard place if the US economy enters a recession as a result of the ongoing war with Iran.
Typically, when the economy experiences a significant downturn, the Fed’s go-to medicine is to lower interest rates. Generally, doing so helps encourage businesses and consumers to spend more money because it lowers borrowing costs, which in turn helps stave off further layoffs.
But the Fed’s decision would likely be complicated by an inflation acceleration stemming from higher energy prices. Economists have a special term to define the ugly combination of rapidly accelerating inflation occurring alongside significantly slower economic growth: stagflation.
If an economy experiences stagflation, then cutting interest rates — while helpful to the employment side of the economy — would likely add to the inflation problem. That’s because, if prices are already rising beyond desired levels, lowering rates increases demand for goods and services, leading businesses to raise prices even higher.
The predicament may therefore lead the Fed to favor doing nothing. That could, however, mean pushing the economy into a deeper recession.
But the Fed isn’t the only government body that has a role to play in the event that the economy experiences a recession. Congress, the president and state governments could opt to pass stimulus packages, as was the case during the pandemic.
The Fed is keen not to repeat its infamous "transitory" inflation mistake
Throughout much of 2021, many Federal Reserve officials hesitated to raise interest rates despite consistently rising inflation. In explaining their decision to leave rates unchanged, several monetary policy statements from that period noted that “inflation has risen, largely reflecting transitory factors.”
At the time, officials believed the run-up in inflation would be short-lived, and as the economy continued to recover from pandemic lockdowns, the pace of price increases would moderate.
But the word “transitory” later came to haunt the Fed as it became clear that inflation was not only sticking but worsening — and the central bank was contributing to the problem by keeping rates at ultra-low levels.
Fed Chair Jerome Powell has repeatedly acknowledged the central bank could have helped prevent the vicious chapter of inflation that ensued had it not waited so long to raise rates.
Now, with the risks of higher inflation climbing due to soaring energy prices stemming from the war with Iran, Fed officials may be much more hesitant to lower rates, even as the labor market has weakened significantly over the past year. On the other hand, some analysts believe the Fed may have to cut, in order to avoid the economic slowdown that comes as a result of higher gas prices.
Mortgage rates jump as Iran war spooks markets
Mortgage rates climbed last week to their highest level in more than a month as the war in the Middle East intensified.
The average rate on a standard 30-year fixed mortgage rose to 6.11% for the week ending March 12, just two weeks after briefly falling below 6% for the first time in more than three years.
Many experts had hoped that a drop below 6% would breathe new life into the market, as homeowners who locked in ultra-low rates during the pandemic might finally be more willing to sell.
But the so-called lock-in effect may already be easing. For the first time in five years, more borrowers have mortgage rates above 6% than below 3%, according to a report this week from Redfin.
Rates also remain lower than they were at the start of last year’s spring homebuying season. In March 2025, the average 30-year fixed mortgage rate was above 6.6%
Trump has called on Fed Chair Jerome Powell to cut interest rates. But the Fed doesn’t directly set mortgage rates. Instead, they tend to track the 10-year Treasury yield, which has risen recently as investors worry that a prolonged war could push oil prices higher and reignite inflation.
Here's what Fed officials have said about the US-Israeli war with Iran
Some Federal Reserve officials have weighed in on what the US-Israeli war with Iran may mean for the US economy and the path of interest rates.
The United States and Israel launched attacks on Iran about a week before the Fed’s so-called blackout period, a two-week timeframe leading up to each Fed meeting when officials are prohibited from discussing monetary policy publicly.
Here’s what Fed officials have said so far about the economics of the Middle East conflict.
- “Now, with the geopolitical events, we need to get a lot more data in,” Minneapolis Fed President Neel Kashkari, a Fed voter this year, said March 3 at an event in New York. “Right now it’s just too soon to know what imprint this has on inflation and for how long.”
- “We’ll have to see how persistent this is,” New York Fed President John Williams, a permanent Fed voter, said March 3 at an event in Washington, DC. “The important question is quantitatively how big of an effect does that have on the US and how persistent those effects are in terms of price stability.”
- “For us thinking about policy going forward, this is unlikely to cause sustained inflation,” Fed Governor Christopher Waller told Bloomberg TV on March 6. “That’s one reason we don’t look at energy prices. When we look at core, core is a better predictor of future inflation.”
- “We already had these big question marks,” Chicago Fed President Austan Goolsbee told The Wall Street Journal in a March 6 interview, explaining how the oil crisis is now making it difficult to discern tariff inflation. “It does dovetail energy prices with what’s going to happen with tariffs,” he said.
Stocks are lower heading into Fed rate decision
US stocks were slightly lower Wednesday afternoon ahead of the Federal Reserve’s decision on interest rates.
The March Fed meeting is set against the backdrop of rising energy prices due to the Iran war. Wall Street will been keen to hear how the central bank is reacting to the surge in oil and gas prices.
“How [Fed Chair Jerome] Powell characterizes how the institution thinks about energy shocks is going to be probably the most useful takeaway for investors,” said Ross Mayfield, investment strategist at Baird Private Wealth Management.
Traders will also pore over the Fed’s quarterly Summary of Economic Projections, which includes the so-called dot plot, laying out anonymous forecasts for rates.
Here’s a look at markets heading into the rate decision:
- S&P 500 down 0.55% as of 12:30 p.m. ET
- Brent crude up 4.55% to $108.13 per barrel
- 10-year US Treasury yield up two basis points to 4.22%
- US dollar index up 0.2%
- Gold futures down 2.6%
