Fed holds key interest rates steady amid Middle East tensions

The Federal Reserve kept interest rates unchanged on Wednesday and reiterated plans to cut rates later this year, even as rising energy prices from the Iran war threaten to prolong the administration’s efforts to control inflation ahead of the midterm elections.

Officials voted 11-1 to hold the benchmark federal funds rate in a range of 3.5% to 3.75%, the second consecutive meeting with no change. The sole dissenting vote came from President Donald Trump's newest FOMC appointee, Stephen Miran. He wanted to lower the target range for the federal funds rate by 1/4 percentage point.

"Uncertainty about the economic outlook remains elevated," the Federal Open Market Committee said in a statement after the decision. "The implications of developments in the Middle East for the U.S. economy are uncertain."

The Federal Reserve’s decision comes despite Trump’s efforts to pressure the central bank to lower interest rates in hopes of supporting his domestic agenda ahead of the midterms, where concerns over prices could influence voters.

After returning to the White House in 2025, Trump launched an aggressive campaign to push for lower interest rates, but so far, his efforts have been unsuccessful.

On Wednesday, the president asked Powell when he'd get on board with cutting rates.

"When is 'Too Late' Powell lowering INTEREST RATES?" Trump wrote in a social media post on Wednesday.

The president has repeatedly criticized Powell’s decisions and has sought to replace him as soon as possible. Trump has said he wants the U.S. to have the lowest interest rates in the world.

The Federal Reserve plans one rate cut this year and another in 2027

"Bottom line: Fed currently signaling an inflation shock from war in Iran, but only a modest one," said Heather Long, chief economist at Navy Federal.

Powell's term as chair expires May 15, making Wednesday's meeting his penultimate as chair if Trump’s nominee, former Fed governor Kevin Warsh, is confirmed ahead of the June meeting.