Fed Expects One Rate Cut in 2026 as Powell Vows to Stay Until DOJ Probe Ends

Central bank officials see Iran war worsening inflation but having little impact on economic growth

Mar. 19, 2026 at 1:23am

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Federal Reserve officials expect the Iran war will worsen inflation this year while having little impact on economic growth, but they still expect to cut their key rate once in 2026. Fed Chair Jerome Powell said he has 'no intention' of leaving the central bank until an investigation into his congressional testimony about the Fed's building renovation is dropped.

Why it matters

The Fed's decision on interest rates and Powell's stance on staying until the DOJ investigation is resolved have significant implications for the U.S. economy and financial markets. The central bank's outlook on inflation and growth amid the Iran conflict will shape expectations for future policy moves.

The details

In its latest policy statement, the Fed left short-term interest rates unchanged at around 3.6%. Central bank officials expect inflation to end this year at 2.7%, up from their previous forecast, but they still project a rate cut in 2026. Powell maintained an optimistic view, saying the U.S. economy has 'been doing really well through a lot of challenges.' However, he said any further rate cuts this year are 'conditional on the performance of the economy.' One Fed official dissented, favoring a quarter-point cut. Powell also said he has 'no intention' of leaving the Fed until the DOJ investigation into his congressional testimony is resolved, even after his term as chair ends in May.

  • The Fed's latest policy decision was announced on March 19, 2026.
  • Powell's term as Fed chair is scheduled to end on May 15, 2026.
  • The DOJ investigation into Powell's congressional testimony is ongoing.

The players

Jerome Powell

The current Chair of the Federal Reserve, who has vowed to stay on until a DOJ investigation into his congressional testimony is resolved.

Kevin Warsh

A former top Fed official who has been nominated by President Donald Trump to replace Powell as Fed chair, but his nomination has been delayed due to the DOJ probe.

Stephen Miran

A Fed governor who dissented in favor of a quarter-point rate cut at the latest policy meeting.

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What they’re saying

“The U.S. economy has been doing really well through a lot of challenges. It's been amazing to see.”

— Jerome Powell, Chair, Federal Reserve

“The rate forecast is conditional on the performance of the economy, so if we don't see that progress then you won't see the rate cut.”

— Jerome Powell, Chair, Federal Reserve

What’s next

The judge in the DOJ investigation into Powell's congressional testimony will decide whether to allow the probe to continue. If the investigation is resolved, Powell could elect to stay on the Fed's board of governors until his term expires in January 2028, even after Warsh is confirmed as the new chair.

The takeaway

The Fed's cautious approach to interest rates amid the uncertainty of the Iran war and the ongoing DOJ investigation into Powell highlights the central bank's delicate balancing act of supporting the economy while keeping inflation in check. The outcome of these events will shape the Fed's policy path in the coming year.