As largely expected, the Federal Reserve held interest rates steady at its March Federal Open Market Committee (FOMC) meeting, leaving the federal funds rate unchanged at a rate of 3.5% – 3.75%—the same level established following December’s quarter-point cut.
There was a singular dissenting vote from Stephen I. Miran, who preferred to lower the target range for the federal funds rate by a quarter percentage point at this meeting.
The decision comes as the Fed navigates a more complicated economic backdrop than it faced just a few months ago, due to geopolitical tensions.
Bright MLS Chief Economist Lisa Sturtevant touched on the current geopolitical conflicts and how they could impact rates.
“If the conflict with Iran is short-lived, mortgage rates could move lower again, even if the Fed holds the federal funds rate steady at its next meeting,” she said. “However, if the conflict is prolonged or expands, the result could be higher inflation and higher mortgage rates. In that case, we may be looking not just at a delay in the spring homebuying season, but at a broader shift in the trajectory of a housing market that had been expected to rebound in 2026.”
Similarly, Realtor.com Chief Economist Danielle Hale said that mortgage rates are likely to move higher this week, but not in response to the Fed’s meeting.
“Developments in the Middle East that are likely to spill over into inflation have been the biggest recent drivers,” she said. “Despite the uptick, mortgage rates are likely to continue to hover below year-ago levels, improving the purchasing power of buyers relative to last spring which will be especially helpful to buyers in the West and South where housing inventories in some markets have recovered back to pre-pandemic levels.”
In the press conference following the decision, Fed Chairman Jerome Powell said that the next six weeks before the May meeting will be critical, and that the Fed is prepared to simply wait and see.
“We’re going to learn a lot, because we’re going to learn six weeks to the day till the next meeting,” he said. “What happens in the Middle East is going to be a big factor, and we’ll know that then.”
When asked whether a rate hike could be back on the table, Powell didn’t rule it out. “The possibility that the next move might be an increase did come up at the meeting, as it did at the last meeting,” he said, noting that a majority of participants don’t see it as their base case—but the committee is not taking anything off the table.
Powell also pushed back firmly on growing fears of stagflation.
“When we use the term stagflation, I always have to point out that that was a 1970s term, at a time when unemployment was in double figures, and inflation was really high,” he said. “That’s not the case right now…What we have is some tension between the goals, and we’re trying to manage our way through it. It’s a very difficult situation, but it’s nothing like what they faced in the 1970s.”
On the labor market, Powell acknowledged growing unease on the committee despite a stable unemployment rate. “It does have a feel of downside risk, and it’s not kind of a real comfortable balance,” he said. “It’s something we’re watching carefully and…are concerned about.”
And while everyday Americans continue to feel squeezed by elevated prices, Powell said the Fed takes that seriously.
“Real wages have been going up in the United States now for three years, roughly, but people are not feeling good about it yet,” he said. “What it does for us is make us even more committed, if that’s possible, to getting inflation back to 2% on a sustained basis.”
Powell addressed questions about his own future at the Fed. With his term as chair set to end on May 15, he confirmed he would remain in the role in an acting capacity if his successor has not yet been confirmed.
“If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed. That is what the law calls for. That is what we’ve done on several occasions, including involving me,” he said.
Powell also stated that he has no intention of leaving the Fed’s board of governors while an ongoing investigation is active. As for whether he will continue to serve as a governor once both his term and the investigation conclude, he left that door open.
”I will make that decision based on what I think is best for the institution and for the people we serve,” Powell said.
