The Federal Reserve again keeps interest rates unchanged, stating that the impact of the Middle East situation is still unclear.

What is AI · How does the Middle East situation affect the Federal Reserve’s interest rate decisions?

China News Service, New York, March 18 (Reporter Wang Fan) The U.S. Federal Reserve announced on the 18th that the target range for the federal funds rate remains unchanged at 3.5% to 3.75%. This is the Fed’s second pause this year, in line with market expectations.

After a two-day monetary policy meeting, the Fed issued a statement saying that current indicators suggest the U.S. economy is expanding steadily. Job growth remains slow, unemployment rates have been relatively stable in recent months, and inflation remains high. The Fed seeks to achieve maximum employment and a 2% inflation rate over the long term. Economic outlooks remain highly uncertain. The impact of the Middle East situation on the economy is still unclear. The Fed is closely monitoring the risks to its dual mandate.

The statement said that to achieve its goals, the Fed has decided to keep the federal funds rate target range unchanged at 3.5% to 3.75%. When considering further adjustments to the rate, the Fed will carefully evaluate the latest data, changing outlooks, and risk balances. In assessing the appropriate monetary policy stance, the Fed will consider a wide range of information, including labor market conditions, inflation pressures and expectations, as well as financial and international developments.

On the same day, the Fed released a summary of economic projections showing that compared to December last year, the median forecast for GDP growth in 2026 was raised by 0.1 percentage points to 2.4%, the inflation forecast for 2026 was raised by 0.2 percentage points to 2.7%, and the unemployment rate forecast for 2026 remained at 4.4%. The dot plot indicates that the median federal funds rate will fall to 3.4% by the end of 2026, consistent with the previous forecast, implying only one rate cut this year.

Federal Reserve Chair Jerome Powell stated at a press conference after the meeting that short-term inflation expectations in the U.S. have risen in recent weeks, possibly reflecting disruptions in the oil market; meanwhile, long-term inflation expectations remain aligned with the 2% target. Currently, the evolution of the Middle East situation has a high degree of uncertainty regarding its impact on the U.S. economy, and the Fed will closely monitor developments.

When asked about the appointment of the next Fed chair, Powell said that if his term expires before a successor is confirmed, he will serve as acting chair until the confirmation process is complete. Additionally, he will not leave the Fed before the Department of Justice investigation concludes, and he has not yet decided whether to continue serving as a Fed governor afterward.

On that day, the three major U.S. stock indices fell sharply after Powell’s remarks. The Wall Street Journal reported that markets are worried that the Middle East situation could cause a significant and prolonged “energy shock,” increasing inflationary pressures and constraining the Fed from cutting rates. The Dow Jones Industrial Average dropped more than 700 points that day.

Bloomberg reported that the uncertain outlook for rate cuts has made Wall Street sentiment tense. Although the Fed maintained its previous rate cut forecasts, market traders are lowering expectations for rate cuts this year. Analysts believe that the Fed is good at waiting and watching, and in the current environment, investors should not act too hastily. (End)