Fed interest rate decision March 2026: Holds rates steady
WASHINGTON – The Federal Reserve voted Wednesday to keep interest rates steady as policymakers face higher-than-expected inflation readings, mixed signals in the labor market and a push toward war.
In a widely anticipated decision, the Federal Open Market Committee voted 11-1 to keep the benchmark federal funds rate steady in the 3.5%-3.75% range. The rate determines banks’ overnight funding costs but affects a wide range of consumer and commercial borrowing.
In its statement after the meeting, the committee made several changes to its view on the economy, with a slightly faster pace of growth and higher inflation forecasts for 2026. Federal Reserve Chairman Jerome Powell will answer questions at the 2:30 PM ET press conference.
Despite the increasing uncertainty, officials have once again signaled that they expect several interest rate cuts. The closely watched “dot plot” reflecting individual members’ rate forecasts points to a cut this year and one in 2027, but the timing remains unclear.
Seven of 19 FOMC participants signaled they expect interest rates to remain unchanged this year; this was one more than the last update in December. While future years show a fairly wide spread in forecasts, the median outlook is for a further cut in 2027 before the funds rate stabilizes around 3.1% over the long term.
In the statement, attention was drawn to the uncertainty regarding the war with Iran, which started about three weeks ago. The conflict and its impact on the Strait of Hormuz have rattled the global oil market and threatened to keep inflation above the Fed’s 2% target.
The statement said, “The effects of developments in the Middle East on the US economy are uncertain.”
Gov. Stephen Miran again balked, supporting a quarter-point cut at a time of growing concerns about the business climate. Governor Christopher Waller, who joined Miran in calling for cuts in January, voted to wait this time.
Before the conflict, markets were pricing in two outages this year, but the chances of a third were slim. But rising oil prices and a string of hard inflation data, including data from before the energy shock, have pushed expectations to a cut at most in 2026.
Faster economic growth was seen
Fed officials, who have updated their economic forecasts, predict that gross domestic product will increase by 2.4% this year, slightly faster than in December. Growth is forecast to run at a solid 2.3% in 2027, up three tenths of a percentage point on the previous outlook.
Officials also raised their inflation outlook for this year. They now expect the personal consumption expenditures price index to reflect a 2.7% inflation rate in both headline and core. However, they predict that inflation will decline to near the Fed’s 2% target in the coming years as the impact of tariffs and war diminishes. Policymakers continue to expect an unemployment rate of 4.4% by the end of the year despite a series of weak employment figures.
The Fed’s decision to hold comes against a complex political backdrop.
Powell chaired the meeting, which could be his next and last meeting as central bank governor. His term ends in May, and Trump has appointed former Fed Governor Kevin Warsh as his successor. While Warsh has stated that he prefers lower rates, he has not recently issued any public statements indicating where his thoughts currently stand.
Further complicating the dynamic is Trump’s Justice Department.
U.S. Attorney Jeanine Pirro in Washington subpoenaed Powell to provide evidence regarding the Fed’s multibillion-dollar headquarters renovation. But Powell resisted the subpoena and accused Trump of using it as an excuse to pressure the Fed to lower rates. A judge sided with Powell on the issue, quashing the subpoenas and agreeing that the effort was merely twisting Powell’s arm to cut it off.
But Pirro vowed to object, and Sen. R.N.C. Thom Tillis also said he would block Warsh’s nomination to the Senate Banking Committee until the Powell issue is resolved. Assuming the court battle continues beyond May, this would keep Powell in her seat until Warsh is confirmed.
Correction: An earlier version of this story misspelled Senator Thom Tillis’ name.
