US Fed Signals Steady Interest Rates Amid Iran Conflict

Central bank may hold off on rate hikes as war with Iran continues

Apr. 1, 2026 at 2:39am

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The US Federal Reserve has hinted that it may keep interest rates steady in the short term, as the ongoing war between the US, Israel, and Iran stretches into its fifth week. Fed Chair Jerome Powell noted that monetary policy changes take time to have an impact, and by the time rate hikes take effect, the oil price shocks from the conflict may have already subsided.

Why it matters

The Fed's decision to potentially hold off on rate hikes could provide some economic stability during the geopolitical uncertainty caused by the US-Iran war. However, prolonged conflict and oil price volatility may still put pressure on the US economy, requiring the Fed to carefully balance its monetary policy approach.

The details

In his comments, Powell explained that "Monetary policy works with long and variable lags, famously, and so, by the time the effects of a tightening in monetary policy takes effect, the oil price shock is probably long gone." This suggests the Fed may refrain from aggressive rate hikes in the near-term, despite high inflation, in order to avoid exacerbating the economic impacts of the ongoing military conflict.

  • The US-Israeli war with Iran has stretched into its fifth week as of the Fed's announcement.

The players

Jerome Powell

The Chair of the Board of Governors of the Federal Reserve System.

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What they’re saying

“Monetary policy works with long and variable lags, famously, and so, by the time the effects of a tightening in monetary policy takes effect, the oil price shock is probably long gone.”

— Jerome Powell, Federal Reserve Chair

What’s next

The Fed will meet again in May to further evaluate its monetary policy approach in light of the ongoing geopolitical and economic conditions.

The takeaway

The Fed's cautious stance on interest rate hikes reflects the complex economic challenges posed by the US-Iran war, as policymakers seek to balance inflation concerns with the need for stability during a period of heightened global tensions and energy market volatility.