FOMC Meeting Preview: So Much for 2% Inflation this Year?

Author: Matt Weller CFA, CMT, Head of Market Research

Date: March 17, 2026

Key Points

• The Federal Reserve is expected to maintain interest rates in the 3.50-3.75% range.
• Revisions to the Fed's economic projections may indicate a shift towards a stagflationary economy.
• Market focus will be on the Fed's Monetary Policy Statement and economic projections following the FOMC meeting.

FOMC Meeting Expectations

The upcoming FOMC meeting is set to conclude on March 18, 2026, with traders anticipating that the Fed will keep interest rates steady. Current market sentiment suggests a 99% probability of no rate changes, with expectations that rates will remain unchanged through at least mid-2026.

Economic Projections

Analysts predict that the Fed may revise its forecasts for unemployment and Core PCE inflation upward due to the ongoing conflict in Iran, which has led to increased energy prices. The unemployment forecast may rise from 4.5% to a higher figure, while Core PCE inflation could be adjusted from 3.0% to between 3.2% and 3.3%.

Impact of the Iran Conflict

The war in Iran is exerting pressure on the Fed's dual mandate by increasing inflation through higher energy costs while simultaneously slowing the labor market. This situation complicates the Fed's decision-making process, making it likely that they will choose to maintain current policy while acknowledging the economic uncertainty in their statements.

Market Reactions

Traders are particularly focused on the GBP/USD currency pair, which has been trending lower. Unless Fed Chairman Jerome Powell expresses significant concern about the economy, traders may look to sell GBP/USD, potentially testing support levels around 1.3200.

Conclusion

As the FOMC meeting approaches, the market is bracing for insights into the Fed's perspective on the labor market and inflation dynamics. With the geopolitical landscape affecting economic forecasts, the Fed's decisions in the coming months will be crucial in navigating the potential for stagflation.

For further updates, follow Matt Weller on Twitter: @MWellerFX.