Fed meeting updates: FOMC set to hold rates steady as oil prices soar

It's the second Fed day of 2026, and America's economic woes are making headlines.

The Federal Open Market Committee will announce its March interest rate decision at 2 p.m. ET. The meeting comes on the heels of a dismal February jobs report and an escalating conflict between the US and Iran that's thrown oil markets into chaos.

Business Insider will follow the news all day, including insights from economists, market analysts, and central bank leaders. Check back here for updates.

Warsh still needs to get through the confirmation process

Before being confirmed as the next chair, Warsh would need to testify in hearings before Congress. Lawmakers would ask him questions about his experience level and outlook on monetary policy. These hearings haven't been announced, but are expected to occur in the next month.

Warsh would need support from both Democratic and Republican leaders to receive confirmation — far from guaranteed due to pushback over the DOJ probe. If his candidacy isn't approved, Trump would need to nominate another successor for Powell, and the process would start over.

Concerns over Fed independence

Powell said he does not take politics into account when making rate decisions — and he hopes the Fed can maintain trust with the American people, despite political pressure.

"The point of independence is not to protect policymakers or anything like that," he said in January. "It just is that every advanced-economy democracy in the world has come around to this common practice."

Producer price inflation came in hot

The producer price index — a key measure of wholesale inflation — unexpectedly jumped by 3.4% year-over-year in February, per a Wednesday morning release from the Bureau of Labor Statistics. Compared to the buyer-oriented CPI, PPI looks at prices from a seller's point of view, indicating the changing cost of energy and raw materials. An inflation jump like this complicates today's Fed decision.

"This report likely reinforces a hold decision by the Federal Reserve later today but tilts the risk toward a more hawkish tone in today's FOMC decision," said Eugenio Alemán, the chief economist at Raymond James. "Even if rates are left unchanged and we see multiple dissents, the messaging may lean toward 'higher for longer,' especially with energy inflation set to re‑enter the picture in coming months."

Stocks dip, oil pops ahead of Fed decision

Major stock indexes dipped ahead of the coming Fed decision and press conference from Jerome Powell. The Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 were all down slightly less than 1%.

Meanwhile, oil prices are still rising as investors continue to monitor the Iran war. Markets will be keenly focused on any commentary in Powell's remarks that indicates how the central bank is thinking about higher oil prices and the impact on inflation. Brent crude rose 6% to over $109 per barrel, while US crude prices rose 3% to $99.

What the president has said about the Fed

Trump has long been vocal about wanting lower borrowing costs, and he hopes the next Fed chair will work more closely with the West Wing on rate decisions. This attitude has sparked alarm with economists, lawmakers, and bank leaders, as the Fed has historically been nonpartisan.

"I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best," Trump said when announcing Warsh's nomination. On March 12, the president also posted that Powell "should be dropping Interest Rates, IMMEDIATELY, not waiting for the next meeting!"

Political tensions haven't cooled

For the past year, the Fed has faced increasing pressure from the White House to lower interest rates. Powell has been in the hot seat, with Trump often threatening to fire him before the end of his term. Fed Governor Lisa Cook's case — in which she denies the administration's accusation that she committed mortgage fraud — was heard by the Supreme Court in January. The Department of Justice also launched a probe into Powell's handling of construction at its Washington, DC, buildings. Powell said the "unprecedented action should be seen in the broader context of the administration's threats."

Federal judge James Boasberg dismissed subpoenas in the probe last week.

"A mountain of evidence suggests that the Government served these subpoenas on the Board to pressure its Chair into voting for lower interest rates or resigning," Boasberg said. "On the other side of the scale, the Government has produced essentially zero evidence to suspect Chair Powell of a crime; indeed, its justifications are so thin and unsubstantiated that the Court can only conclude that they are pretextual."

Powell has left the chair with a piece of advice for his successor: "Stay out of elected politics. Don't get pulled into elected politics. Don't do it."

Leadership change is imminent

With Powell's term up May 15, Trump nominated former Wall Streeter and Fed governor Kevin Warsh as successor. Warsh has a reputation for being hawkish on monetary policy and tough on inflation, and it's unclear if he will uphold Trump's desire for steep interest rate cuts.

Hearings for Warsh's nomination aren't yet scheduled, and his confirmation may be an uphill battle. Lawmakers across the aisle, especially retiring North Carolina Senator Thom Tillis, who sits on the Senate Committee on Banking, Housing, and Urban Affairs, have said they won't approve of any chair nominees from Trump due to concerns over Fed independence. The president hopes the next Fed leader will consult with him more closely on decisions.

What's at stake

For the FOMC, Wednesday's meeting will continue setting the tone for monetary policy in 2026. The Fed previously penciled in one rate cut for the year, but that's subject to change based on economic conditions. This is Jerome Powell's second-to-last meeting before his term as chair ends.

How the Fed responds to war-related inflation concerns and the disappointing February job numbers will have trickle-down effects on various consumer borrowing rates.

Gas prices have surged

Oil prices recently surged past $100 per barrel in response to the US and Israel's ongoing air strikes against Iran. Trump signaled that the war could end soon, briefly calming markets, but volatility remains. Most traffic through the Strait of Hormuz has been halted since the first week of March.

Average gas prices have climbed to over $3 a gallon, and many consumers are scrambling to fill up their vehicles. It's the first time since 2023 that every US state posted an average gas price above $3, per AAA.

The war has already pushed up the cost of some plane tickets, and oil supply disruption could soon start impacting the cost of household utilities and food.

All eyes are on how the Iran war will affect inflation

The Bureau of Labor Statistics published new consumer price index data last Wednesday, showing the inflation rate held steady at 2.4% in February as expected. Core inflation, which excludes volatile food and energy prices, also held steady at 2.5%.

However, that report was based on data mainly gathered before the start of the Iran war, which could heat up inflation and jeopardize progress toward the 2% goal. Economists expect to see the effects of the oil shock from the Iran war as soon as the next report.

Oil prices remain elevated as the Strait of Hormuz remains largely closed off. Gas prices are up from a month ago, and there are other factors affecting what consumers pay at the pump, such as higher demand in the spring.

Alexandra Wilson-Elizondo, global co-chief investment officer of multi-asset solutions at Goldman Sachs Asset Management, said February data "was collected before the conflict in Iran sent crude oil surging roughly 30%, with natural gas, aluminum, fertilizer, freight rates, and shipping insurance moving higher with it."

"The Strait of Hormuz remains the wildcard, and if disruption is sustained, the inflation improvement embedded in today's print could reverse quickly," Wilson-Elizondo said in commentary following the CPI report.

Finding a job is difficult in the bleak market

Even though the US needs fewer jobs to keep unemployment steady than in the past, February's job market report was disconcerting. The US lost 92,000 jobs in February after adding a revised 126,000 jobs in January. That was partly due to job losses in the healthcare sector from a strike. Unemployment ticked up, and labor force participation dropped to its lowest level since December 2021, at 62%.

"It's going to be a much more competitive market, and so if you are looking for a job right now, you need to be doing the things that are going to help you stand out," Cory Stahle, an economist at Indeed Hiring Lab, said.

The broader economy is also looking worse than previously thought. GDP revisions published on Friday showed that real growth in last year's fourth quarter was just 0.7%, half the 1.4% estimate in the advance report in February.

Markets latest: Stocks set to move a little higher, oil benchmarks split

With a hold from the Fed heavily priced in, the conflict in Iran continues to be the biggest show in town in markets.

Relative calm is the prevailing narrative on Wednesday, with futures in all three major US indexes pointing towards gains of around 0.5% when trading begins at 9:30 a.m. ET.

In Europe and Asia, stocks are also trading higher, with Germany's DAX benchmark 0.7% up as of around 7 a.m. ET, and Japan's Nikkei 0.6% higher.

Oil's two main benchmarks diverged a little on Wednesday morning, with WTI oil down 1% to around $94 per barrel, and Brent crude, the international benchmark, up 0.5% to just shy of $104.

The dollar index, which tracks the greenback against a basket of global currencies, was almost completely unmoved, trading 0.03% higher.

A likely hold

CME FedWatch, which estimates probabilities of the Fed's choices based on market moves, is predicting a near-total chance of an interest rate hold. Holding rates steady could help temper inflation, at the risk of leaving an already sluggish labor market without support. Fed leaders will have to weigh both ends of their dual mandate, which focuses on stable prices and maximum employment.

Powell was optimistic at the January meeting: "The US economy expanded at a solid pace last year and is coming into 2026 on a firm footing," he said. "While job gains have remained low, the unemployment rate has shown some signs of stabilization, and inflation remains somewhat elevated." However, with rapidly shifting oil prices, the committee's inflation outlook may now be more tempered.

A tumultuous news month

Central bank leaders last met in late January. Since then, the Bureau of Labor Statistics reported a loss of nearly 100,000 jobs, the Supreme Court voted down many of President Donald Trump's tariffs, and the US began a war with Iran that cut off a large part of the world's energy supply.

If the FOMC wasn't already feeling cautious about monetary policy, they are now.

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