Fed to Hold Rates Steady, Release Updated Economic Forecasts

The Federal Reserve is widely expected to hold the federal funds rate steady within the 3.5%–3.75% target range for a second consecutive meeting in March 2026, as it navigates a challenging environment marked by the risk of an oil shock, persistent inflation, and signs of a softening labor market. Since the January FOMC meeting, oil prices have surged amid the conflict with Iran, raising concerns that inflation could accelerate before it has returned to the Fed’s target. Against this backdrop, policymakers are likely to signal a continued wait-and-see stance, effectively adhering to a “first, do no harm” approach. The central bank will also release updated economic projections, with markets closely watching for any revisions reflecting the war’s potential impact on inflation, economic growth, and the future path of interest rates.

Fed officials are divided over the future path of interest rates, reflecting a tension between the need to contain inflation and the desire to support the labor market, according to the minutes of the January 2026 FOMC meeting. Several participants indicated that further reductions in the fed funds rate would likely be appropriate if inflation continues to decline in line with their expectations. Others argued that it may be prudent to hold the policy rate steady for some time and some even raised the possibility that rate increases could become necessary if inflation remains persistently above target. In addition, a vast majority of participants judged that downside risks to employment had moderated in recent months while the risk of more persistent inflation remained. The Fed left the federal funds rate unchanged at the 3.5%–3.75% target range in its January 2026 meeting, in line with expectations, after three consecutive rate cuts last year.

The current policy stance risks slowing U.S. growth, Federal Reserve Governor Stephen Miran said in a speech. He argued rates may be tighter than necessary despite supportive measures from the Trump administration, including tax cuts. Speaking at the Federal Reserve Bank of Dallas, Miran warned that “the biggest risk… is that we’re misconstruing just how tight monetary policy is,” and reiterated his call for further rate cuts. Miran said he does not see a significant inflation threat, noting that very low shelter inflation could offset price pressures elsewhere. “I have a hard time being concerned about inflation,” he said. As long as inflation remains contained, he believes the Fed should continue supporting the labor market with looser policy, especially as supply growth outpaces demand, allowing the economy to expand without reigniting price pressures.