On 18/3, following a two-day policy meeting, the Fed decided to maintain its benchmark interest rate at 3.5-3.75%. This move mirrored its January meeting. Last year, the central bank reduced rates three times.

"Economic activity continues to expand at a solid pace," the Fed stated in its 18/3 announcement. However, inflation "is accelerating" and the labor market "has shown little change in recent months."

Ahead of the meeting, fresh signs of a weakening US labor market and rising inflation due to oil prices placed Fed officials in a dilemma. They had to consider either holding rates steady to prevent worsening inflation or cutting them to support a slowing job market.

A US Department of Labor report released earlier this month showed businesses unexpectedly cut jobs in February. The unemployment rate also edged up to 4.4%.

Average US benchmark interest rates from 1995 to 2025. *Graphic: Reuters*.

The Fed meeting occurred amidst the 19th day of the conflict between the US, Israel, and Iran. The near closure of the Strait of Hormuz and attacks on oil and gas infrastructure in several nations created an energy shock, likely causing consumer prices to surge and reigniting inflation that the Fed has worked to curb since 2022.

Gasoline prices in the US averaged USD 3.84 per gallon (USD 1.02 per liter) on 18/3, according to the American Automobile Association (AAA). This marks an increase of approximately 28% since the conflict began.

The Fed anticipates only a 25 basis point rate cut this year, with a similar reduction expected next year.

Stephen Miran was the sole governor to dissent from this decision, advocating for a 25 basis point rate cut. Miran has frequently cast dissenting votes in recent meetings.

On the US stock market, major indices narrowed their losses following the Fed's announcement. The S&P 500 is currently down 0.6%, the Nasdaq Composite has decreased by 0.5%, and the DJIA has fallen by 0.9%.

Meanwhile, global gold prices continue to decline sharply. Each ounce has currently lost USD 122, now trading at USD 4,882. A few hours earlier, the price briefly dropped to USD 4,840.

This meeting was also one of two final sessions Powell would attend as Chair. His term concludes on 15/5. In late January, US President Donald Trump nominated former Fed Governor Kevin Warsh as the next Fed Chair. This nomination requires approval from the US Senate.

Ha Thu (according to Reuters)