FOMC meeting, March 17-18: The Fed is expected to hold its policy rate steady at 3.50-3.75% and may delay interest rate cuts due to rising inflation risks.

        At the FOMC meeting slated for March 17-18, 2026, the US Federal Reserve (Fed) is expected to keep its policy rate unchanged at 3.50-3.75% to assess the economic and inflation outlook amid heightened uncertainty, stemming from conflicts in the Middle East. Recent labor market and inflation data have not yet reflected the tensions that have erupted in the Middle East.
        ​For the remainder of 2026, KResearch assesses that the outlook for US interest rate cuts will be highly uncertain, depending on the duration of the Middle East conflict and its impact on global oil prices and inflation.
If the conflict in the Middle East is prolonged, the Fed may need to delay interest rate cuts. At present (as of March 1, 2026), most market participants expect that the Fed may not cut rates at all this year, despite the economic slowdown. This would be an extremely challenging scenario for pursuing its dual mandate (of maximum employment and stable prices) simultaneously, with the following key issues:

• The labor market has significantly slowed down, as shown below:

• The unemployment rate rose to 4.4% in February 2026 from 4.3% in the previous month but remains low by historical standards.
• The labor force participation rate declined to 62.0%, the lowest level in over four years.
• Nonfarm payroll employment edged down by 92,000 jobs in February 2026, contrary to market expectations of an increase of around 55,000 jobs.
• Employment figures for December 2025 and January 2026 were revised down by a combined 69,000 jobs, resulting in the three-month average job gain of fewer than 6,000 jobs per month.

 
•    The US economy remains resilient but exhibits uneven growth. The main drivers are investment in the AI industry and consumption by high-income households. However, KResearch expects private consumption to slow down going forward, amid risks from import tariffs and conflicts in the Middle East that erode household purchasing power. This is likely to further reinforce a K-shaped economic pattern, with low- to middle-income households being more severely affected by rising living costs than other groups.

•    Inflation risks are expected to rise in line with global energy prices. US headline inflation (CPI) stood at 2.4% YoY in February 2026, prior to the attacks in the Middle East.

• Retail gasoline prices in the US rose by 20.8% within just 12 days after the attacks. During March 3–11, 2026, WTI crude oil prices—the US market benchmark—averaged above USD80 per barrel, up from an average of around USD65 per barrel in February 2026. As a result, US retail gasoline prices increased from USD2.98 per gallon at the end of February 2026 to USD3.60 per gallon as of March 12, 2026.
• If the conflict is prolonged and crude oil prices remain above USD80 per barrel throughout the year, US inflation could rise above 3% this year. Oil accounts for around 3% of the CPI basket, and rising energy prices can also be passed through to other goods and services, such as transportation and logistics, fresh food, and petrochemical or plastic products. In general, a USD10 per barrel increase in crude oil prices is expected to raise US headline inflation (Headline CPI) by around 0.2%.

 
•    The future path of interest rates will depend on developments in Iran, which affect oil prices and inflation. Kevin Warsh, who has been nominated to succeed Jerome Powell as the Fed Chair in May 2026, is known as a hawk who prioritizes inflation control and takes a strict stance on the size of the Fed's balance sheet. As a result, he is likely to be cautious about cutting interest rates while oil prices remain highly volatile, which could delay the rate-cutting timeline. The market has revised its outlook for Fed interest rate cuts to be postponed until 2027.