Fed votes to hold rates steady, notes 'uncertain' impacts from Iran war

WASHINGTON – The Federal Reserve on Wednesday voted to hold its key interest rate steady as policymakers navigate their way through higher-than-expected inflation readings, mixed signs on the labor market – and a war. In a widely expected decision, the Federal Open Market Committee voted 11-1 to keep the benchmark federal funds rate anchored in a range between 3.5%-3.75%. The rate sets overnight funding costs for banks but influences a broad range of consumer and business borrowing. The committee in its post-meeting statement made few changes to its view on the economy, with a slightly faster pace of growth and higher inflation projections for the full year in 2026. Federal Reserve Chair Jerome Powell will answer questions at a 2:30 p.m. ET news conference . Despite the elevated uncertainty, officials again signaled they still expect a few rate cuts ahead. The closely watched "dot plot," which reflects individual members' rate projections, pointed to one reduction this year and another in 2027, though the timing remains unclear. Of the 19 FOMC participants, seven signaled they expected rates to stay unchanged this year, one more than the last update in December. While future years showed a fairly wide disbursement of forecasts, the median outlook is for an additional cut in 2027 before the funds rate steadies out around 3.1% for the long term. The statement did note the uncertainty associated over the war with Iran that started nearly three weeks ago. The fighting and its impact on the Strait of Hormuz has roiled the global oil market and threatened to keep inflation above the Fed's 2% target. "The implications of developments in the Middle East for the U.S. economy are uncertain," the statement said. Governor Stephen Miran again dissented, favoring a quarter percentage point cut amid rising concerns about the jobs climate. Governor Christopher Waller, who joined Miran in wanting a cut in January, voted this time to hold. Before the conflict, markets had been pricin...