One-Read Guide | Federal Reserve Maintains Interest Rates Unchanged, Milan Casts Opposing Vote Again, Powell Denies U.S. Economy in Stagflation

Feature: Federal Reserve Keeps Interest Rates Unchanged; Financial Institutions Expect Only One Rate Cut This Year; Powell Says Impact of Iran War Still Unclear

On March 11, local time, the Federal Reserve maintained the target range for the federal funds rate at 3.50% to 3.75%, keeping the median expectation of one rate cut this year. The voting result was 11 to 1, with Board Member Stephen M. Miller voting against, advocating for a 25 basis point cut.

The rate decision statement removed the January language about signs of stabilization in the labor market, replacing it with the phrase that the unemployment rate has been “little changed in recent months.” It is expected that there will be one rate cut in 2026 and 2027 (by 25 basis points each), with no policymakers indicating a preference to raise rates this year.

The median dot plot for interest rates remained unchanged, with the proportion of officials supporting and opposing a cut still at 12:7. The median for the long-term rate projections was raised to 3.1%.

The post-meeting statement made minimal adjustments to the economic outlook, slightly raising the 2026 growth and inflation forecasts. The 2026 economic growth forecast was modestly increased from 2.3% in December to 2.4%, and the median core PCE inflation expectation was raised from 2.5% to 2.7%.

The statement noted that the development of the Middle East situation remains uncertain and could keep inflation above the Fed’s 2% target.

Full Fed Decision: Uncertainty Over Impact of Middle East Developments on US Economy (Click to view original)

Fed Chair Powell stated at the press conference that rate cuts will only be considered if inflation shows sustained progress. Inflation is expected to continue declining but at a slower pace than previously anticipated.

He believes the current policy stance is appropriate; the Fed will make rate decisions at each meeting without a preset policy path, and he described the latest economic forecasts influenced by the high uncertainty from the Middle East war as “somewhat guesswork.”

Powell said that high inflation is largely due to rising commodity prices and tariffs, which are theoretically one-off factors. Recent energy price increases will push overall inflation higher, and oil price volatility could feed into core inflation measures. Sustained high oil prices could negatively impact consumer spending.

Powell stated that it is “too early” to judge the war’s impact.

Powell noted that the US economy remains resilient amid many challenges, with labor demand weakening and clear downside risks in the labor market. However, he denied that the US economy is in stagflation and said the term would only be used if economic conditions deteriorate significantly.

He reaffirmed that the Fed’s independence allows it to fulfill its responsibilities, with broad support from both Democrats and Republicans in Congress.

Regarding his personal appointment, Powell said he has no intention of leaving the Fed Board before the end of the Justice Department investigation; if the Fed Chair is not confirmed at the end of his term, he will serve as acting Chair temporarily; after the investigation concludes, he has not decided whether to remain on the Board.

Market Reaction

US Stocks Fall, Dow Hits Year-Low; Inflation Pressures and Powell’s Remarks Weigh on Markets

US stocks declined on Wednesday, with the Dow Jones Industrial Average hitting its lowest level this year. Amid rising oil prices driven by the US-Israel conflict in Iran, recent economic data showed ongoing inflation, and Powell’s comments further heightened concerns about persistent inflation in the US.

The Dow fell 768.11 points, down 1.63%, to 46,225.15; the Nasdaq dropped 327.11 points, down 1.46%, to 22,152.42; the S&P 500 declined 91.39 points, down 1.36%, to 6,624.70.

The Dow broke below a key technical level, suggesting potential future difficulties. It fell below its 200-day moving average for the first time since June 2025, indicating a negative long-term trend.

Tensions in the Middle East Push Brent Oil Above $107

On Wednesday, Brent crude futures rose nearly 4%, surpassing $107 per barrel. Ongoing threats to energy infrastructure by Israel and Iran in the Middle East have heightened fears of further disruptions to the already strained global oil supply.

Brent crude rose $3.96, or 3.83%, to close at $107.38 per barrel.

US WTI crude for April delivery increased $0.11, or 0.11%, to settle at $96.32 per barrel.

Gold Prices Continue Decline After Fed Decision, Touching Over One-Month Low

Spot gold continued to fall after the Fed’s announcement, affected by a stronger dollar and expectations that rates may stay high longer amid Middle East conflict. Gold prices earlier hit a over-one-month low.

Spot gold dropped 2.9%, to $4,860.21 per ounce, briefly touching the lowest since February 6. April delivery US gold futures declined 2.2%, settling at $4,896.20.

US Short-Term Treasury Yields Rise, 2-Year Yield Up 10 Basis Points

The short end of the US Treasury yield curve extended declines, with the 2-year yield rising 10 basis points to reach its highest since August, surpassing last week’s high.

This movement was driven by Powell’s comments, which led traders to further reduce expectations of rate cuts this year. Market expectations for a rate cut are now about 13 basis points, down from 25 basis points on Tuesday.

Analysis and Commentary

Michele from Morgan Asset Management: “Fed signals ‘Don’t Worry’”

Bob Michele of Morgan Asset Management said the Fed sent a reassuring message amid panic caused by rising oil prices and geopolitical risks from Iran. The economy is experiencing some short-term inflation shocks, which could actually accelerate growth, and he was “stunned” by the Fed’s decision.

Apollo Global Management: “Fed Ignoring Middle East Impact”

Chief Economist Torsten Slok said that at the time of the rate hold decision, the Fed appeared to be “completely ignoring” the impact of Middle East tensions. For these shocks to significantly affect the Fed’s economic model, they would need to last at least a quarter; the Fed clearly indicated they do not expect such impacts to last that long.

“The Fed’s Voice”: Powell’s Constraints on Trump’s Influence over the Fed

Nick Timiraos noted that Powell said if his successor is not confirmed before his term ends on May 15, he will continue as Chair. This decision impacts Trump’s ability to reshape the Fed. If Powell remains, Trump loses a potential appointee he could have nominated.

MAI Capital Strategist: Rising Oil Prices Do Not Mean a More Hawkish Fed

Chris Grisanti of MAI Capital said the Fed’s statement reassures him that the Fed remains cautious. He also believes that the idea that rising oil prices will make the Fed more hawkish is wrong. The Fed is more concerned about oil price volatility hurting the economy and may lean toward easing. Given the complex situation, outcomes vary, and he has revised his investment stance to be more cautious—avoiding energy and defense stocks now.