Fed minutes warn of rate hikes or cuts as Iran war pressures oil, jobs

The Federal Reserve’s March policy minutes released Wednesday revealed deep concern among officials about the dual‑edged impact of the US‑Israeli war with Iran. With energy prices surging after the February 28 offensive, policymakers warned that sustained oil shocks could keep inflation elevated longer than anticipated, potentially forcing the central bank to raise interest rates. At the same time, most officials feared that a protracted conflict would soften labor market conditions, which might warrant additional rate cuts.

Competing Risks and a Divided Outlook

The minutes showed that officials agreed it was too early to determine how Middle East developments would affect the US economy, but they pledged to stay “nimble.” Many noted that substantially higher oil prices could erode household purchasing power, tighten financial conditions and weigh on global growth, increasing downside risks to employment. The Federal Open Market Committee voted 11‑1 to keep the benchmark rate at 3.5%‑3.75%, while many still expected that lowering rates would become appropriate if inflation continued moving toward the 2% target.

Ceasefire Brings Some Relief, Uncertainty Remains

The meeting took place weeks after the joint US‑Israeli strikes on Iran, which triggered a jump in energy prices and renewed inflation concerns. Although a two‑week ceasefire announced Tuesday helped push oil prices lower, the minutes reflected the heightened uncertainty that prevailed when officials met in March. Markets still largely expect the Fed to stay on hold for the rest of the year, though traders modestly increased bets on a possible rate cut following the truce. For Türkiye and other emerging economies, any shift in Fed policy will have direct spill‑over effects on capital flows, exchange rates and borrowing costs.