US Fed Meeting 2026 Highlights: Fed hits pause on rate cut amid US-Iran war uncertainty; RBI rate cut hopes fade

Powell’s comments prompted traders to scale back expectations for rate cuts, reinforcing a higher-for-longer rate outlook amid volatility in energy markets. They are now pricing in only about 15 basis points worth of Fed easing this year, less than one full quarter-point cut.

In economic forecasts released with their decision, Fed officials raised their outlook for inflation in 2026 to 2.7% from 2.4%. Notably, they saw the core measure — which excludes volatile food and energy categories — also rising to 2.7%. (Reuters)

The US yield curve bear-flattened (2Y: up by 10bps, 10Y: up by 6bps) as markets read this as a hawkish hold. DXY rose 0.6%, and the S&P500 was down 1.4%.

According to Ankita Pathak, Head – Global Investments, Ionic Asset - Fed has decided to be in wait and watch mode, given the war related uncertainty. Fed’s inflation expectations are now dependent on fading tariff inflation and clarity around the Iran war and consequent energy prices.

“Fed has rightly chosen to be on a likely extended pause given the uncertainty. The “mildly restrictive” stance seems to be appropriate for now. The dot plot showed no change with one cut each getting signaled in 2026 and 2027. The pause restricts weaker dollar and therefore hurts the EM trade which will see perils of both higher energy prices and weaker currency. RBI is also likely to face similar dilemma and is now unlikely to cut in April,” said Pathak.

VK Vijayakumar, Chief Investment Strategist, Geojit Investments said:

"The Fed has held the rates unchanged as expected. The mildly hawkish stance of the Fed, too, was expected. The negative reaction of the US market was more in response to the escalation of the war rather than the Fed’s commentary."

A hawkish Fed may add to the RBI’s policy constraints ahead, with the Iran crisis persisting longer than expected. RBI’s ability to stabilize the INR through FX management will be limited in the current scenario, and its dilemma going ahead will be between FX intervention and tolerance (with an April rate cut off the table), said Madhavi Arora, Lead – Economist at Emkay Global Financial Services Ltd.

The Bank of Japan kept its key short-term interest rate unchanged at 0.75% at its March 2026 policy meeting, leaving borrowing costs at their highest level since September 1995. The decision matched market expectations and was backed by an 8–1 vote, with board member Hajime Takata dissenting in favor of a rate hike to 1%. Policymakers maintained their view that the economy is recovering moderately, though they flagged rising uncertainty as the escalating Middle East conflict continues to cloud the outlook.

Higher long-term rates and unclear policy expectations have weighed on asset valuations and heightened volatility across rate-sensitive sectors. All this policy uncertainty is negative for emerging markets. Regarding India, the impact is a bit worse as the India–US trade deal has also not been finalized. These developments are putting additional downward pressure on the rupee–dollar exchange rate. As a result, we expect FII inflows into India to remain under pressure, which could further weigh on equity valuations and influence debt markets. In contrast, gold prices in India are likely to remain supported in this environment. While India’s strong long-term growth outlook remains intact, the near-term macroeconomic backdrop will likely be dominated by these global headwinds, said Nachiketa Sawrikar, Fund Manager, Artha Bharat Global Multiplier Fund

Seems that the Fed decision comes at a point where inflation is improving, but the case for becoming meaningfully dovish is still weak. US headline CPI for February came in at 2.4%, while core CPI was 2.5%. At the same time, the Fed’s preferred inflation gauge, core PCE, was still running at 3.1% in January, which is meaningfully above the 2% target. With the policy rate currently at 3.50% to 3.75%, the real debate is not just whether rates move today, but whether the Fed sounds confident enough to still keep the door open for cuts later in 2026. Markets will likely react more to the tone, projections, and Powell’s commentary than to the headline decision itself, said Viram Shah, Co-founder and CEO, Vested Finance.

Gold prices traded higher after briefly touching a more than one-month low, but gains were capped by a firm dollar and the Federal Reserve’s hawkish stance, which has limited hopes for near-term rate cuts. Spot gold price gained 0.4% to $4,838.39 per ounce, rebounding after hitting its lowest since February 6 earlier in the day. Prices fell 3.7% on Wednesday. US gold futures for April delivery declined 1.1% to $4,839.90. Spot silver price gained 0.5% to $75.74 per ounce.

The US dollar index, which measures the greenback’s strength against a basket of six currencies, edged down 0.1% to 100.11, holding near its highest levels of the last four months. The yen was up 0.1% at 159.78, edging back from its weakest levels in two years. The euro climbed 0.1% to $1.1469, while the British pound nudged up 0.1% to $1.3273.

Asian markets traded lower on Thursday, following overnight losses on Wall Street, after the US Federal Reserve policy and the escalating US-Iran war that drove oil prices higher.

Japan’s Nikkei 225 declined 2.47%, while the Topix fell 1.82%. South Korea’s Kospi plunged 2.56%, and the Kosdaq dropped 1.73%. Hong Kong’s Hang Seng index futures indicated a

US Treasuries pared their losses after the Federal Reserve maintained its projection that it will lower interest rate once this year. The yields on two-year notes — most sensitive to the Fed’s policy changes — rose by two basis points to about 3.69%, while 10-year yields traded one basis point higher around 4.21%.

US stock market ended sharply lower on Wednesday after the Federal Reserve kept interest rates unchanged and projected only a single rate cut for the year.

The Dow Jones Industrial Average declined 1.63% to 46,225.15, while the S&P 500 dropped 1.36% to end the session at 6,624.70, its lowest close in nearly four months. The Nasdaq closed 1.46% lower at 22,152.42.

US stocks sold off following the US Fed’s decision to keep rates unchanged. All three key indices finished in the red:

• The Dow Jones Industrial Average fell 1.64% to its lowest level in four months. With today’s decline, the index has dropped 5.6%, putting it on track for its worst monthly fall since 2022.
• The S&P 500 and Nasdaq also declined by 1% each.
• Meanwhile, the US dollar rebounded above the 100-mark.

This marks the second straight time the US Fed has held rates steady, though the economic backdrop has changed significantly since their last meeting.

But weak employment data in February, US-Israeli strikes against Iran that has caused global oil prices to surge and threaten to boost inflation have raised concerns.

Policymakers dropped language from their January statement describing the labour market as showing signs of stabilisation. In its place, they said the unemployment rate was “little changed in recent months".

The US Federal Reserve announced its second monetary policy decision for 2026 after a two-day Federal Open Market Committee (FOMC) meeting, keeping its benchmark interest rate steady for the second consecutive time on Wednesday, March 18. The central bank has adopted a wait-and-watch approach before making any immediate policy moves — check key highlights here.

Generative AI will contribute to productivity gains for years to come, Fed Chair Jerome Powell said while urging caution on disinflationary impact.

According to Powell, the AI data center building boom in the US is putting upward price pressure on many goods and services and was “probably pushing inflation up at the margin”. But in the near term, “you're not looking at something that would immediately call for lower rates, or that would be lowering inflation over time”.

He added that it was an “empirical question” on whether AI will expand supply faster than demand, but it will contribute to higher productivity over time. “Higher productivity is the thing that allows incomes to rise over time, and so it's a great thing,” Powell said.

The S&P 500 remained lower following the decision, while Treasury yields retreated after earlier gains, according to a Bloomberg report.

• Federal Reserve officials left interest rates unchanged, the FOMC voted 11-1 to hold the benchmark federal funds rate in a range of 3.5% to 3.75%.
• Officials continued to expect one quarter-point rate cut in 2026 and one in 2027. No policymakers indicated a preference to raise rates this year.
• Policymakers slightly upgraded their outlook for growth in 2026 to 2.4%, from the 2.3% they forecast in December.
• Their unemployment forecast remained unchanged at 4.4% for the end of 2026.
• Officials also raised their outlook for 2026 inflation to 2.7% from 2.4%.
• They also saw the core measure also rising to 2.7%.

Fed Chair Jerome Powell said a rate hike is not the expected path of monetary policy but there were discussions that “our next move might be an increase”. He added that “the vast majority of participants don't see that as their base case,” but “we don't take things off the table.”