The U.S. Federal Reserve elected to keep its trendsetting overnight lending rate at its current range of 3.50% to 3.75%, citing worries about inflation.
The U.S. central bank’s revised “dot plot” now suggests only one possible interest rate cut this year, likely in December.
The decision to hold interest rates at current levels comes as crude oil prices surge amid the ongoing Iran war, raising the prospect of a spike in inflation.
Brent crude oil, the international standard, is approaching $120 U.S. as Iran continues to attack energy assets across the Middle East, including oil and natural gas refineries.
At his news conference, Federal Reserve Chair Jerome Powell said, “The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation.”
Earlier in the day, wholesale inflation data was released, showing that it rose an annualized 3.4% in February, above the Fed’s 2% target.
U.S. fourth-quarter 2025 gross domestic product (GDP) was recently revised down to just 0.7% growth.
The persistent inflation and weak economic growth have raised worries about a return of stagflation, a situation where consumer prices rise in a negative economic growth environment.
“We are balancing these two goals in a situation where the risks to the labor market are to the downside, which would call for lower rates, and the risks to inflation are to the upside, which would call for higher rates or not cutting,” said Powell.
Earlier on March 18, the Bank of Canada decided to leave its overnight interest rate at 2.25%, also citing concerns about inflation and a slowing economy.
