At the latest Federal Open Market Committee (FOMC) meeting in March, the Federal Reserve voting committee chose to keep interest rates unchanged. The release of the Fed Minutes, documenting members’ thought processes and economic projections during the meeting, showed that the commencement of the U.S. and Israel’s war with Iran unsurprisingly added a major new factor to economic calculus.
The conflict, now in a two-week ceasefire as of April 7, has contributed to uncertainty about the economic outlook amid rising oil prices. “Substantially higher oil prices could reduce households’ purchasing power, tighten financial conditions, and reduce growth abroad,” the Fed Minutes read.
The fragile ceasefire has also been complicated by new Israeli strikes on Iran’s ally Lebanon, which Israel has claimed is not included in the agreement. Following the announcement of the ceasefire, the stock market saw a major uptick and oil prices plunged.
The Fed Minutes noted members believed the conflict could also adversely affect the labor market, as businesses could be inclined to pause hiring during uncertain times. If the labor market does take a turn for the worse, voting participants indicated this could incentivize rate cuts. At the same time, members also indicated that if inflation continues to rise, they could be inclined to pursue rate hikes.
At the March FOMC, the only member of the board to dissent was Stephen Miran, who voted for a quarter-point rate cut. Since being appointed to the Fed by President Trump, Miran has consistently pushed for lower rates. Per the Fed Minutes, he argued the current interest rate level is “restrictive” and contributing to a weak labor market.
The Fed Minutes noted little job gains or changes in unemployment since the previous FOMC in January, but also that inflation remains above the FOMC’s 2% target inflation rate. (Simultaneous low growth and a soft labor market mixed with elevated inflation is known as stagflation.) Fed members expect the effects of tariffs on price increases will diminish, but now-elevated oil prices are expected to push up inflation. Inflation coming in line with the Fed’s goal of 2% was also cited as an event that would prompt a rate cut. At the moment, per the Minutes, models project between one to two 25-basis point rate cuts before December 2026.
Deceleration in housing prices was noted throughout the Fed minutes as a factor expected to exert downward pressure on inflation. The S&P Cotality Case-Shiller Home Price Index found a weak start in home-price growth as of the onset of 2026. However, not all sectors of the economy are on this same path.
“Although price increases in the housing services category had slowed considerably over the past year and were now close to their pre-pandemic pace, increases in nonhousing core services prices had continued to be elevated relative to their pre-pandemic pace,” the Minutes noted.
Additionally, delinquency rates for several consumer loans—including mortgages insured by the Federal Housing Administration (FHA)—currently remained elevated. Mortgage rates had declined for several weeks earlier in 2026, but have seen a reversal and resumed climbing following the commencement of the Middle Eastern conflict.
