When it comes to the benchmark federal funds rate, we are all in agreement.
This is because it guides interest rates for car and student loans, home equity loans and credit cards.
It also affects the 10-year Treasury bond, which in turn affects mortgage rates in the stagnant real estate market.
Billions of dollars in taxpayers’ money (primarily from individual tax returns and payroll taxes) pay interest on the country’s $38.9 trillion debt.
For consumers, a delay in rate cuts could mean higher borrowing costs during an affordability crisis, leaving many Americans struggling to pay energy, grocery, housing and healthcare bills in a “low-hiring, under-fire” labor market.
Amid the fog of Iran attacks, rising inflation expectations, labor market concerns and fears of stagflation, the Federal Reserve is widely expected to hold the funds rate steady at its policymaking meeting this week.
That pause is no surprise, although some moderate Federal Reserve watchers, including President Donald Trump, want to see an immediate aggressive easing of monetary policy and lower interest rates.
the state of future rate cuts in 2026 is a looming concern for Main Street, Wall Street and Washington, D.C.
The Federal Open Market Committee will report its long-awaited Summary of Economic Projections(SEP) on March 18, providing a model of how officials are interpreting the effects of the Iran war on inflation in the short, medium and long term.
Economists and market analysts have sharply adjusted their forecasts in the past three weeks, and some now doubt that the Federal Reserve will cut rates at all in 2026.
The Fed’s dual mandate in Congress requires it to balance full employment and price stability.
The two goals often conflict, operate on different timelines, and are influenced by unpredictable global events, such as pandemics and wars.
Federal Reserve Bank of New York through FRED® ·Federal Reserve Bank of New York through FRED®
FOMC voted 10-2 to hold interest rates on hold stable between 3.50% and 3.75% in January after three consecutive quarter-point cuts in its last three meetings of 2025.
Those cuts were based on data showing a growing weakening of the labor market and cooling inflation, although still rigid and tied to tariffs.
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It was the FOMC’s first pause since July 2025.
The Federal Reserve uses government and private data sources to drive monetary policy decisions, a rear-view mirror approach often criticized as too restrictive.
Those critics, including Treasury Secretary Scott Bessent and former Federal Reserve Governor Kevin Warsh, Trump’s nominee to be the next chairman of the Federal Reserve, advocate the use of more advanced models, including AI to set interest rates.
The SEP is a quarterly report from the 19 Federal Reserve officials, including the 12 voting members of the FOMC.
It measures several key economic variables, including:
Real gross domestic product growth. The recently revised GDP was 0.7% for the fourth quarter of 2025, a sharp slowdown from 4.4% growth in the third quarter of 2025.
Unemployment rate. This was recently reported to be higher than expected in 4.4%following a disappointing February payrolls report.
Inflation. Includes projections for personal consumption expenditure (PCE) inflation and core PCE inflation, excluding food and energy. The January PCE reached 2.9% year after year, above the Federal Reserve’s 2% annual target.
“It basically shows that inflation firmed up at the beginning of the year,” Omair Sharif, founder of the research firm Inflation Insights, told the New York Times on March 13. “All key measures are moving in the wrong direction.”
Even before the Iran attacks, the Federal Reserve faced the dilemma of troubling risks to both sides of its term in Congress: jobs and inflation.
Ahead of the release of the latest inflation and GDP figures for January and February, Fed officials showed a divisive outlook on interest rate cuts in 2026.
Related: Traders renew Fed bets on a rate cut as jobs fall and oil rises
President Trump continued to criticize the Federal Reserve and Powell for not lowering rates to 1% or lower.
“Where is Federal Reserve Chairman Jerome ‘Too Late’ Powell today?” posted March 12 on TruthSocial. “You should lower interest rates IMMEDIATELY and not wait for the next meeting!”
Traders fear that instability in Iran will raise inflation and drag down the labor market, threatening both sides of the Fed’s mandate.
CME Group’s FedWatch tool moved the probability of a quarter-point cut to December from June, where it was just a month ago.
Goldman Sachs has delayed its forecast on central bank rate cuts and now expects quarter-point cuts in September and December, citing rising inflation risks related to the Iran war. Goldman had previously projected that the easing cycle would begin in June, followed by another taper in September.
Barclays It also pushed back its first cut projection to September, expecting a single quarter-point reduction for the full year, below estimates for multiple cuts.
Morgan Stanley Chief U.S. economist Michael Gapen said that while the Federal Reserve will likely “look into” temporary energy price shocks, risks now lean toward cuts coming later (and being larger) if economic activity weakens.
High frequency economy Chief economist Carl Weinberg offered a more hawkish approach, saying the Federal Reserve should consider a rate hike at their meeting on March 17 and 18 to push back the increase in inflation caused by the oil shock – according to their perspectives – to 3.5% by the summer.
The pain of the Iran war oil crisis is not just at the gas pump for consumers.
(Although I’m very glad I filled my nearly empty tank last week for $3.09 a gallon after seeing several gas stations in my hometown in the Boston suburbs advertising $3.69 for regular gas today.)
Global oil supply chain disruptions could last for months, driving prices higher. The effect would be shown below.
Consumer Price Index Data Headlines Immediately
Underlying inflation indirectly via cargo, airlinesand estate
PCE datawhich is the Federal Reserve’s preferred measure of price stability
In the case of a sustained blow to the stock marketlower spending by high-income households, which have been driving the K-shaped economy in recent years.
“The Middle East conflict is likely to leave a visible mark on the U.S. economy through higher energy prices, tighter financial conditions, increased uncertainty in the private sector, and renewed supply chain stress.” EY-Parthenon Economists Gregory Daco and Lydia Boussour wrote in a story published by Bloomberg on March 13.
Related: Stunning court ruling resets bets in favor of Warsh as next Federal Reserve chair
This story was originally published by TheStreet on March 15, 2026, where it first appeared in the Fed section. Add TheStreet as a preferred source by clicking here.
