The Federal Reserve remains divided on the path for interest rates amid Middle East conflict concerns, according to recently released minutes from its March meeting. Officials maintained the target range at 3.5% to 3.75% but debated whether geopolitical risks could necessitate future cuts or hikes. While many suggested a 2024 cut is possible if inflation cools, others warned rate increases might be needed if price pressures persist.
Federal Reserve officials were split on whether the Middle East conflict could spur interest rate cuts before 2026. The Federal Open Market Committee voted 11-1 to keep rates steady at 3.5% to 3.75% in its March meeting, with many cautious about the war’s economic impacts.
The official consensus pointed to a potential rate cut this year, but only if inflation does not get out of control. “Many participants judged that, in time, it would likely become appropriate to lower the target range for the federal funds rate if inflation were to decline in line with their expectations,” according to the Fed minutes.
Rate cuts are generally seen as a positive catalyst for crypto as they free up investment liquidity. The feeling from the FOMC was that it was “too early to know how developments in the Middle East would affect the U.S. economy.”
While some officials were cautiously optimistic about a cut, others warned the opposite might be necessary. “Some participants judged that there was a strong case for a two-sided description of the Committee’s future interest rate decisions … reflecting the possibility that upward adjustments … could be appropriate if inflation were to remain at above-target levels,” the minutes stated.
Inflation was not the only concern, as officials pointed to potential downside risks in the labor market. They argued that “in the current situation of low rates of net job creation, labor market conditions appeared vulnerable to adverse shocks.”
According to the CME Group‘s FedWatch tool, there is a 75.6% chance the Fed keeps rates steady at its December meeting. Meanwhile, the chance of a rate cut is 20.4%, while the chance of a hike is 2.4%.
