(Finance Below) Fed Maintains Interest Rate Unchanged, Analysts Expect Delayed Rate Cut Timeline

China News Service Beijing, March 19 (Tao Siyue) — The Federal Reserve announced on March 19 Beijing time that the target range for the federal funds rate remains unchanged at 3.5% to 3.75%. Market attention is focused on the considerations behind this move, with oil prices and their impact on inflation becoming a key point.

Citigroup analysts believe that, amid escalating conflicts in the Middle East, Brent crude futures could rise to $120 per barrel in the coming days. If energy infrastructure suffers widespread attacks or the Strait of Hormuz remains closed for an extended period, the average price of Brent crude futures in the second and third quarters of this year could reach $130 per barrel.

Federal Reserve Chair Jerome Powell stated that it is still unknown how the Middle East situation will affect the U.S. economy in terms of scope and duration, but rising oil prices will put downward pressure on U.S. employment and upward pressure on inflation.

“The U.S. economy currently shows a combination of slowing growth, weak employment, and stable prices,” said Cheng Shi, Chief Economist at ICBC International. The Fed’s decision to hold steady aims to consolidate the downward trend in inflation and keep policy options open.

Cheng Shi believes that geopolitical events not only push up actual inflation through increases in energy and commodity prices but also may impact the U.S. economy through channels such as reduced consumer and investment demand and rising import costs, thereby exacerbating economic fluctuations and increasing stagflation risks amid slowing growth.

The latest Fed economic projections show that U.S. personal consumption expenditures (PCE) are expected to reach 2.7% by the end of 2026, up from 2.4% forecasted in December last year. This upward revision of a key inflation indicator is mainly due to soaring oil prices and tariff-related price pressures.

At a press conference after the rate decision, Powell admitted that monetary policy needs to balance the risks between inflation and economic growth. To restart rate cuts, policymakers need to see signs of inflation easing.

The latest “dot plot” of Fed rate forecasts shows that among the 19 members of the Federal Open Market Committee (FOMC), seven expect one or no rate cuts this year.

CICC released a research report stating that the actual situation may be more complex than Powell described, with the U.S. economy entering a “quasi-stagflation” phase. Since last year, tariff hikes and tighter immigration policies have constrained supply, and recent oil price increases will further intensify supply-side contraction, reinforcing stagflation characteristics. Therefore, CICC believes that the likelihood of the Fed raising interest rates this year is low, with rates likely remaining unchanged in the first half, and rate cuts postponed to the second half.

CITIC Securities’ research team predicts that the Fed will not cut rates at its April meeting, but after its new chair takes office, there may be one 25 basis point rate cut in the second half of the year.

“In the first half of the year, the Fed will mainly adopt a data-dependent approach,” said Bai Xue, Senior Deputy Director of Research and Development at Dongfang Jincheng. The Fed needs to confirm the sustainability of inflation decline, but the likelihood of restarting rate hikes during the rate-cutting cycle is small. In the medium to long term, monetary policy will remain generally accommodative.

The Chicago Mercantile Exchange’s FedWatch tool shows that as of 5 p.m. local time on the 18th, the market assigns a 51.2% probability that the Fed will keep rates at the current or higher levels at the December policy meeting this year, significantly higher than 23.5% a week earlier. (End)