Economy News

Fed holds rates as oil nears $108; Powell on the war's effect: 'We just don't know'

The US Federal Reserve kept its main interest rate at 3.50–3.75% on Wednesday 18 March, in an 11-1 vote. Governor Stephen Miran dissented in favour of a cut, The Post and Courier, carrying Reuters, reports. Officials as a group still expect one quarter-point cut by the end of 2026, but they raised their year-end inflation forecast to 2.7% from 2.4% in December. Growth was nudged up to 2.4% and unemployment left at 4.4%.

The backdrop is the war with Iran. Reuters says oil had risen from below $80 to $108 before the decision; CommBank Newsroom, carrying AP, puts Brent at $107.38, up from about $70 before the war. Powell said higher energy prices “will push up overall inflation”. Asked how much weight to give the projections, he said: “We just don't know.”

Markets fell. AP says the S&P 500 lost 1.4% to 6,624.70 and the Dow 768.11 points to 46,225.15, after US wholesale inflation unexpectedly rose to 3.4%. Traders put the odds of a Fed cut this year at 49%, down from 95% a month earlier, according to CME Group data. Gold fell 2.2% to $4,896.20.

How each outlet framed it

• The Post and Courier (Reuters) — the Fed's view: new forecasts, a “meaningful” number of officials pencilling in fewer cuts, and Powell's future as chair.
• CommBank Newsroom (AP) — the market view: stocks down, yields up to 4.26%, and rate-cut hopes cut in half.

What we don't know yet: who leads the Fed after May. Trump has nominated Kevin Warsh, who has not been confirmed; Powell said that if no successor is confirmed in time, “I would serve as chair pro-tem”.