How many rate cuts? Iran war upends Federal Reserve’s next steps

FILE -Federal Reserve Chair Jerome Powell speaks during a news conference, Wednesday, Jan. 28, 2026, at the Federal Reserve Board Building in Washington. (AP Photo/Jacquelyn Martin, File) 2026-03-17T17:09:40Z WASHINGTON (AP) — The Iran war has scrambled the Federal Reserve’s outlook on inflation and unemployment and will likely further delay interest rate cuts this year, putting off any relief for consumers struggling with high borrowing costs for home and car purchases. The spike in oil and gas prices presents already-divided Fed officials with a worst-case scenario as they conclude a key meeting Wednesday: Costlier gas will raise inflation in the short run, which typically causes the central bank to raise borrowing costs — or at least leave them unchanged — to combat higher prices. Yet if the spike is high enough or lasts long enough, it could hammer the economy and push up unemployment, which the Fed would typically respond to by moving in the opposite direction, and cutting its key rate. For now, the clearest way forward for the 12-member rate-setting committee, led by Chair Jerome Powell, is to stand pat and wait to see which way the economy goes. The Fed is expected to keep rates unchanged Wednesday, and may remain on pause at their meetings in late April and June. Many economists now see the first rate cut this year not taking place until September or later. “With Iran and the oil shock, I think the committee’s room for maneuver here is pretty limited,” said Nathan Sheets, chief global economist at Citi and a former senior economist at the Fed. “I think they’ve got to wait and see how this plays through.” Yet the Fed also has to release a set of quarterly economic projections that will create its own set of pitfalls. In December, the committee forecast that inflation would cool to 2.6% by the end of this year, with core inflation excluding food and energy falling to 2.5%. But those figures were already rising before the Iran war, with core prices rising 3.1%

原文链接: AP News