Federal Reserve holds interest rates steady amid Iran war, mixed economic signals

The Federal Reserve held interest rates steady Wednesday as the war in Iran and conflicting economic signals continued to throw snags in the path to rate cuts, while Fed Chair Jerome Powell said he would stay on until his successor is confirmed.The central bank – which voted 11-1 to keep rates between 3.5% and 3.75% – nodded to uncertainty around the Middle East conflict, with Powell joking that if there was ever a meeting to skip economic projections, “this would be a good one, because we just don’t know.”Most policymakers kept their predictions for the year the same, with the closely-watched “dot plot” showing one rate cut this year and another in 2027.But the Fed remained highly divided, with seven of the committee’s 19 members signaling they do not expect any rate cuts this year – one more person compared to the last update in December.The Dow Jones had plunged 768 points, or 1.6%, while the S&P 500 and Nasdaq also fell more than 1%.Powell signaled the economy could be strong enough to withstand further pressure after “doing pretty well through a lot of significant challenges” – adding that slow job growth is partially due to the country’s immigration crackdown, while tariffs and the pandemic have hit inflation.“We had the tariff shock, we had the pandemic and now we have an energy shock of some size and duration,” he said at a news conference.“You worry that’s the kind of thing that can cause trouble for inflation expectations.”The projections suggest the Fed “will aim to ‘look through’ the current oil-spike induced inflation increase,” Stephen Coltman, head of macro at 21shares, wrote in a Wednesday note.Policymakers typically look past energy shocks, but Iran’s blockade of the Strait of Hormuz has sent oil prices above $100 a barrel and caused the most severe energy supply disruption ever – raising fears that a prolonged conflict could reheat stubborn inflation.Fed officials have been split on their views...