The Federal Reserve kept interest rates unchanged this week, choosing caution as rising oil prices add pressure to the economy.
Policymakers left the benchmark rate at 3.5% to 3.75%, where it has stayed since December. The decision did not surprise markets, but the reasons behind it have become more complicated. The conflict involving Iran has pushed oil prices higher, raising concerns that inflation could pick up again.
Jerome Powell said officials still need more time to understand how the situation will unfold. He noted that no one can clearly predict how the war will affect inflation or growth in the months ahead.
The Fed usually cuts rates when it wants to support the economy and raises them to slow inflation. Right now, it faces both risks at the same time. Higher fuel costs could lift prices across the board, while also leaving households with less to spend.
Forecasts suggest inflation may end the year around 2.7%, slightly above earlier expectations. Growth projections remain modest, and unemployment is expected to stay stable.
Despite earlier hopes for rate cuts this year, markets have started to push those expectations further out. Pressure from Donald Trump to lower rates has also added to the backdrop, though the Fed continues to signal that decisions will depend on incoming data.
For now, officials appear willing to wait rather than act too soon.
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