Nobody expected a cut. What they were watching was what Powell said about the path ahead. That's where things got uncomfortable.

The Decision

The FOMC voted 11-1 to hold rates steady, as expected. Governor Stephen Miran dissented in favor of a cut — his fifth consecutive dissent since joining the committee in September.

The Fed's new Summary of Economic Projections revised the 2026 inflation outlook higher. Officials now expect the PCE price index at 2.7%, up from December's projection, with core at the same level. GDP growth was nudged up to 2.4% for this year. The dot plot still shows one rate cut in 2026 and another in 2027 — but officials were vague about timing.

What Powell Said

Chair Jerome Powell said it was "too soon to know" how the Iran war would affect the economy, and acknowledged that near-term inflation expectations have risen "likely reflecting the substantial rise in oil prices." He also confirmed the bar to cut has moved: "The bar is a little bit higher for cutting rates."

That's not what investors hoping for relief wanted to hear. The updated projections came the same morning as a hot PPI report showing wholesale prices up 3.4% annually — the highest level in over a year.

Oxford Economics' Michael Pearce called the Iran war a "stagflationary shock" — capable of simultaneously weakening growth and pushing prices higher. That's the Fed's least favorite scenario, because cutting to support growth would stoke inflation, but holding too long risks making the labor market worse.

The Powell Wildcard

Powell's term ends May 15 and Kevin Warsh, Trump's nominee to replace him, hasn't been confirmed. Powell said Wednesday he "has no intention of leaving the board" until an investigation by Trump-appointed special prosecutor Jeanine Pirro is "well and truly over" — which could keep him in the chair beyond May.

The next Fed meeting is April 29-30. Traders are pricing in an 83% chance of another hold.