The U.S. Federal Open Market Committee (FOMC) announced on Wednesday that it will maintain the federal funds rate in the target range of 3.5%-3.75%. This decision comes as the committee closely monitors the macroeconomic implications of the ongoing conflict in the Middle East.
During a press conference, Fed Chair Jerome Powell noted that despite stable interest rates, the housing market remains sluggish, and the labor market is showing signs of cooling. He also stated that inflation levels are still above the Fed's 2% target, remaining "slightly elevated."
Jerome Powell speaks to reporters following the March 2025 FOMC meeting. Source: Federal Reserve
Powell indicated that the combination of persistently high inflation and a cooling labor market creates tension for the Fed as it balances its dual mandate of maximum employment and price stability. He further added that the hostilities in the Middle East have introduced greater uncertainty into the economic outlook.
Market analysts suggest that traders are not anticipating any near-term rate cuts, and analysts expect market liquidity to be maintained.
A 25-basis-point hike in this instance would have raised the federal funds rate to the range of 3.75% to 4.00%.
Probability of target rate at the April 2026 FOMC meeting. Source: CME Group