The two-day Federal Open Market Committee (FOMC) meeting will conclude today, and markets expect rates to remain steady. According to CME Fed Watch, there is a 98.9% chance that the US Fed will maintain interest rates between 3.5% and 3.75%.
However, there are at least two key reasons why the market will continue to make it a major global event. Firstly, Powell’s press conference will be closely observed. Secondly, the ‘dot plot’ gets revealed, indicating the rate path in the months ahead.
Powell’s Press Conference
Powell’s remarks on the potential of an energy crisis leading to resurgent inflation will be closely watched. If Powell hints at oil-driven inflation, any rate cut scenario, at least in the short-term, disappears.
Powell’s tone and the guidance on March 18 will decide the fate of the global markets, particularly the US stock market.
Meanwhile, the pressure on Powell to cut rates continues to rise. US President Donald Trump once again urged the Federal Reserve to lower interest rates right away during a White House meeting, stating that they ought to hold a “special meeting” to do so.
Powell retires as Chair in May 2026 but remains on the Board of Governors until 2028.
Oil prices, which were around $70 before the US-Israel war on Iran began on February 28, had touched a high of $119 before settling around $100 on Tuesday. A 40% rise in crude oil prices has the potential to push consumer prices higher, unless the prices revert to earlier levels.
In a recent update, US Producer Prices and also core PPI rose more than expected after US producer prices grew 0.7% month on month in February 2026, up from 0.5% in January and far beyond predictions of 0.3%. It is the largest increase in producer prices in seven months, with goods prices rising by 1.1%, the highest since August 2023, led by a 48.9% increase in prices for fresh and dry vegetables.
Core producer prices in the United States, excluding food and energy, climbed 0.5% in February 2026, slowing from a 0.8% increase in January but exceeding market expectations of a 0.3% rise. Core producer prices rose 3.9% year on year in February, the biggest increase in three years, following a downwardly revised 3.5% rise the previous month.
Dot-Plot
At regular intervals, the US Fed also releases a Summary of Economic Projections, along with the ‘dot plot’. The economic projections pave the way for understanding the Federal Reserve’s so-called dot plot, which the central bank uses to signal its outlook for the path of interest rates, based on median projections.
The December FOMC meeting’s dot-plot indicated that the US Fed is likely to cut rates twice in 2026. Whether the dot-plot releasing today maintains its earlier stand of 2 rate cuts in 2026 remains to be seen.
US Fed Rate Hike
“Rising oil prices have stoked inflation concerns, while mixed labor market signals offered little clarity on future rates. Markets do not anticipate Fed easing until at least September or October, with only a single rate cut expected this year,” says Jigar Trivedi, Senior Research Analyst at Indusind Securities.
While the world is looking at a rate cut, there are whispers of a rate hike in the market. This is getting reflected in the Federal Reserve Bank of Atlanta’s market probability tracker, which is showing a 25% chance of a hike compared to a 20% chance of a cut.
Thanks to rising energy prices due to the Iran war, which may increase inflation, potentially prompting the Federal Reserve to raise interest rates to maintain high employment and control inflation. However, that scenario will depend a lot on the incoming data, especially the US CPI and PPI data of March, to suggest any kind of a pivot for the Fed. The Fed increased interest rates from near-zero between 2022 and 2023 to control post-pandemic inflation, but has implemented rate cuts since 2024.