Certain Federal Reserve policymakers advocated maintaining the option of raising interest rates, citing persistent inflation likely to intensify from the U.S.-Iran war, per the minutes of the central bank’s March 17-18 meeting.
Although numerous officials anticipate eventual rate reductions, the potential for hikes underscores doubts surrounding this year’s borrowing cost trajectory.
The minutes indicate that several participants expressed the view that it would probably become suitable to reduce the target range for the federal funds rate eventually, provided inflation decreased according to their projections.
Yet, a few of those same officials shifted their rate-cut timelines “further into the future in light of recent readings on inflation,” according to the document.
“Some” participants argued there was a “strong case” for portraying upcoming rate choices as “two-sided” — open to either cuts or increases — the minutes noted.
The record reveals that Fed members foresaw elevated oil costs boosting near-term inflation and postponing the drop toward the 2 percent goal.
The “vast majority of officials” observed that curbing inflation might proceed “slower than previously expected,” with heightened odds of it staying above 2 percent for an extended period.
Last month’s forecasts indicated 12 of 19 Fed officials expected at least one rate cut in 2026, concealing underlying divisions. Seven projected a single cut — matching the count who foresee steady rates through 2026 — suggesting Jerome Powell’s potential successor, Kevin Warsh, would take over a fractured group.
Read more: U.S. jobs see sharp rebound with 178,000 nonfarm payrolls added in March
Evaluating inflation and energy price volatility
The Federal Reserve kept interest rates unchanged for the second meeting in a row last month, after multiple reductions late in 2025.
In their key statement, officials described “the implications of developments in the Middle East for the U.S. economy are uncertain.”
They reported the unemployment rate as “little changed,” revising prior language about joblessness “signs of stabilization.”
Policymakers stuck to calling inflation “somewhat elevated,” while estimates reflected expectations of a bigger energy-driven uptick this year than earlier thought.
Energy prices plunged Wednesday following a two-week negotiated ceasefire, though they linger above pre-war marks.
Lately, investors boosted expectations that the energy spike would fuel inflation enough to pause Fed cuts — or possibly trigger hikes. The truce has cooled such speculation.
In an interview earlier this month, Powell noted [the central bank hadn’t yet arrived] at the point of deciding whether to “look through” the Iran war’s energy surge.
“We will eventually, maybe, face the question of what to do here. We’re not really facing it yet because we don’t know what the economic effects will be,” Powell remarked, noting rates currently suit a “wait and see” stance.
