The Federal Reserve stands pat, with the dot plot maintaining the median forecast of one interest rate cut this year.

As expected, Federal Reserve officials remained on hold, maintaining the median expectation for one interest rate cut this year, while acknowledging increased uncertainty due to the Middle East war. Officials said in their policy statement, "The economic impact of the Middle East situation on the U.S. economy is still unclear. The Committee is closely monitoring the risks to its dual mandate of maintaining price stability and achieving full employment." The Federal Open Market Committee voted 11-1 to keep the benchmark federal funds rate in the 3.5%-3.75% range. Board member Stephen Milan voted against, calling for a 25 basis point rate cut. This is the second consecutive meeting where officials have kept rates unchanged, despite significant changes in the economic background since the last meeting. In January, policymakers expressed growing confidence in the stabilization of the unemployment rate. Shortly after, several officials indicated a preference to maintain rates unchanged for a longer period, to help further reduce inflation. However, with the release of the weak February nonfarm payroll report, the outlook for the labor market is now clouded. Starting on February 28, the U.S. attack on Iran caused global oil prices to surge, further threatening inflation trends and potentially harming growth and employment. Federal Reserve officials removed the statement from the January statement about signs of stabilization in the labor market, replacing it with the statement that the unemployment rate has "changed little in recent months." Based on the pricing of federal funds rate futures, investors downgraded their expectations for interest rate cuts in 2026 in response to the war, but still believe there will be one cut before the end of the year.