Shaw, Jinse Finance
Early morning on March 19, 2026, the Federal Reserve concluded its second FOMC meeting of the year, and as expected, announced that the federal funds rate target range will remain between 3.5% and 3.75%. This marks the second pause after three consecutive rate cuts at the end of last year. The FOMC statement specifically highlighted uncertainty about the impact of the Middle East situation on the U.S. economy. The statement said that the Fed is holding steady and maintaining its forecast for rate cuts later this year, “threatened by rising energy prices triggered by the Iran conflict, the Fed’s long-standing fight against inflation may need to be extended.” The statement did not mention changes related to bond purchases or balance sheet adjustments, indicating that the Reserve Bank of New York’s Reserve Management Purchase (RMP) operations are proceeding as planned. Among the 12 voting members of the FOMC, only Federal Reserve Board member Stephen I. Miran voted against the decision, halving the opposition from the last meeting. This means the opposition votes in this rate decision are the fewest in the past four meetings. Following the announcement, Fed Chair Powell responded at the press conference regarding his upcoming term, current hot topics, and judicial investigations.
After the Fed’s statement and before Powell’s press conference, major assets experienced little volatility. Powell’s tone was hawkish, and during the press conference, U.S. stocks, bonds, and gold saw increased declines, with the dollar strengthening further. The S&P 500 ultimately fell 1.4%, marking its worst performance on a Fed decision day in 2024. Due to decreased risk appetite and the Fed’s decision, Bitcoin plunged 4.6%, falling back near $71,000, and Ethereum dropped 6%.
Amid escalating tensions in Iran, concerns about inflation driven by energy crises intensified, and the Fed’s continued pause aligned with market expectations. But what will be the Fed’s policy path moving forward? How will Middle Eastern conflicts impact the global macroeconomy? Is Powell really prepared to ‘stand firm’ against Trump? How should markets interpret this decision, and where will it lead?
- The Fed’s second consecutive pause, tensions in Iran fueling inflation fears
Early morning today, the Federal Reserve concluded its second FOMC meeting of the year, again announcing that the federal funds rate target range will stay between 3.5% and 3.75%, marking the second pause, in line with market expectations. The FOMC statement specifically pointed out the uncertainty about the impact of the Middle East situation on the U.S. economy. The statement said that the Fed is holding steady and maintaining its forecast for rate cuts later this year, “threatened by rising energy prices triggered by the Iran conflict, the Fed’s long-standing fight against inflation may need to be extended.”
After the decision, markets maintained their forecasts of one rate cut each in 2026 and 2027. The U.S. interest rate futures market expects the Fed to resume rate cuts in December 2026 or January 2027. The latest CME “FedWatch” data shows a 100% probability of holding rates steady in April. The probability of a 25 basis point cut by June is 11.2%, with an 88.8% chance of no change. In July, the chance of no rate change is 77.4%. According to Polymarket, market expectations after the decision have risen to 82% for the Fed to hold rates steady for three consecutive meetings, while the probability of a 25 basis point cut next time has fallen to 16%.
After the Fed’s statement, Powell’s hawkish tone was evident. U.S. stocks, bonds, and gold saw increased declines during the session, and the dollar strengthened further. The S&P 500 fell 1.4%, hitting a new low since November, the Nasdaq dropped 1.4%, and the Dow declined 1.6%. Oil and gas sectors were the only gainers. Spot gold fell 3.6%, approaching $4,800 support, hitting a one-month low. U.S. bond yields surged sharply, with the 2-year yield rising 10 basis points to 3.775%, and the 10-year yield up nearly 6.5 basis points. The dollar appreciated significantly by 0.76%, returning above 100. Risk appetite declined, and speculative cryptocurrencies were sold off, with Bitcoin plunging 4.6%, back near $71,000, and Ethereum down 6%.
Ongoing Middle East conflicts, combined with potential inflation risks from the energy crisis, continue to heighten market concerns. The Fed’s decision to pause reflects this sentiment. The future policy path will likely remain influenced by developments in Iran and energy markets.
- Only one dissenting vote in FOMC, consensus mostly formed
Aside from the impact of Middle East tensions, the FOMC’s statement this time showed little change from the previous one. It specifically noted: “The evolving situation in the Middle East remains uncertain for the U.S. economy. Threatened by rising energy prices from the Iran conflict, the Fed’s long-term fight against inflation may need to be extended.” The economic outlook commentary was minimally adjusted from last time. Previously, the statement said unemployment “showed some signs of stabilization,” but this time it states that “the unemployment rate has remained roughly unchanged in recent months.” This slight change indicates a somewhat downgraded assessment of the labor market. The statement did not mention changes related to bond purchases or balance sheet management, indicating that the RMP operations are proceeding as planned. The statement reaffirmed the FOMC’s commitment to achieving maximum employment and a 2% inflation rate over the long term, with high uncertainty about the U.S. economic outlook. The FOMC remains vigilant about risks to employment and inflation.
Among the 12 voting members, only one dissented this time, fewer than last time. The statement notes that the dissenting voter was Federal Reserve Board member Stephen I. Miran, who advocated for a 25 basis point rate cut at this meeting. The other eleven members, including last time’s dissenting Board member Christopher J. Waller, voted to keep rates unchanged.
The Fed’s dot plot shows that among 19 officials, 7 believe rates should stay unchanged throughout 2026, 7 favor a cumulative 25 basis point cut, 2 favor a 50 basis point cut, 2 favor a 75 basis point cut, and 1 favors a 100 basis point cut.
- Powell responds on term, investigation, and future plans
Fed Chair Powell later explained the pause and the economic outlook at the press conference, answering questions from reporters. Powell emphasized that the Fed believes the current policy stance is appropriate and that the economy is in a good position to decide how to adjust rates going forward. He said the U.S. economy is expanding, inflation remains slightly high, and short-term inflation expectations have risen in recent weeks, with most long-term expectations aligned with the 2% target. Regarding employment, Powell noted that job growth has slowed, largely reflecting decreased labor supply growth due to reduced immigration and lower labor force participation, along with weakening demand.
In response to questions about his term, Powell stated that if inflation does not show progress, he will not cut rates. He mentioned that the possibility of further rate hikes has been discussed, but most do not see a rate increase as the baseline scenario. Powell also said that some oil price shocks will be reflected in core inflation; rising energy prices will push overall inflation higher. It is too early to assess the full impact of the Middle East situation on the economy. Consumer spending and employment will face some downward pressure, while inflation may rise. Powell added that data on infrastructure spending might be boosting inflation, and investments in artificial intelligence could temporarily push neutral interest rates higher.
When asked about his term ending and future plans, Powell said he has no intention of leaving the Fed before the investigation concludes, and he will serve as interim chair until his successor is confirmed. He also said he has not yet decided how long he will stay at the Fed, prioritizing the best interests of the Fed and the public.
This was Powell’s first public comment on how the Justice Department investigation might affect his tenure. Many speculate he might continue beyond his May term expiration, possibly serving until 2028. His hawkish tone at the press conference further fuels market expectations that the Fed will continue to pause.
- Interpreting the Fed’s decision and Powell’s statements
Regarding this rate decision, Nick Timiraos of The Wall Street Journal, often seen as the “Fed’s mouthpiece,” said that Powell stated if his successor is not confirmed before his term ends on May 15, he will continue as Fed Chair. This is the most direct statement Powell has made about the upcoming leadership change. Powell further said that as long as the Justice Department’s investigation into him is ongoing, he will not leave the Fed. He has not yet decided whether he will remain on the Board if a successor is appointed. It is confirmed that Powell can serve as a Board member until 2028 after his chairmanship ends. This decision significantly impacts Trump’s efforts to reshape the Fed. If Powell stays, Trump loses a potential appointee. Currently, three of the seven Fed Board members are Trump appointees.
Ira Jersey, Chief U.S. Rate Strategist at Bloomberg Industry Group, noted that compared to the increased uncertainty from Middle East tensions in the Fed’s outlook, the more noticeable change was the upward revision of inflation expectations, indicating the Fed’s greater concern about current oil-related inflation, less so about inflation next year. The outlook thus incorporates a stepwise rise in inflation expectations.
George Goncalves, Head of U.S. Macro Strategy at MUFG, commented that the Fed issued a “neutral” statement, “aimed at avoiding signaling any specific policy stance, while also signaling vigilance about growth shocks and inflation spillovers from Middle East conflicts.”
Dan Carter, Senior Portfolio Manager at Fort Washington Investment Advisors, believes Powell appears “more worried about inflation than about the negative impact of oil shocks on growth.” He sees short- to medium-term rates as “attractive,” given that “the likelihood of rate hikes remains low.”
Edward Harrison, Macro Strategist at Markets Live, said, “When inflation expectations become unanchored, the speed can be astonishing. This will force the Fed, which remains dovish, to pivot rapidly toward the rate-hiking stance seen in other central banks. Such policy ‘sudden stops and big turns’ are the real risks for bond markets and risk assets.”
Tipp from PGIM admitted, “The market was holding on until Powell’s comments about staying on, which finally broke the tension, implying: he’s more hawkish than Waller’s Fed.”
- Market outlook and analysis
After the Fed’s pause, how will major assets, including cryptocurrencies, perform? Here are some key analyses.
1. Nick Timiraos of The Wall Street Journal said that the Fed’s rate hold comes amid “clouds of Iran conflict.” Before the Fed’s leadership change, “a new oil shock threatens to prolong the Fed’s multi-year inflation fight.” He noted that the Fed’s current stance is closer to neither stimulating nor slowing the economy, and unless economic weakness appears, rate cuts will become less justifiable.
2. Fitch Ratings’ Brian Coulton said that if the oil price surge caused by Middle East war proves temporary, “a rate cut in June by the Fed is a realistic possibility.” The Fed today maintained rates as expected, emphasizing the need for more time to assess the war’s impact on inflation. Officials slightly raised inflation forecasts. Coulton said, “This may partly reflect recent oil price jumps and some stickiness in the latest core PCE data.” He believes the Fed might continue to hold in April. Without persistent inflation, a weakening labor market “could reignite concerns about rising unemployment,” prompting a rate cut in June.
3. CITIC Securities pointed out that the Fed’s March 2026 rate forecast remains unchanged at a median of 3.4%, consistent with December 2025, with a slight upward revision to inflation and a modest increase in GDP growth forecasts, while unemployment remains unchanged. Powell did not comment on Iran or oil prices, and confidence in inflation easing from tariffs has further weakened since January. They expect no rate cut in April, and after Waller’s appointment as Chair, a 25 basis point cut is likely in the second half.
4. Citibank has lowered the 12-month target prices for Bitcoin to $112,000 and Ethereum to $3,175, down from $143,000 and $4,304, respectively. The main reasons include stalled U.S. crypto legislation, declining ETF inflows, and weak on-chain activity. The market remains highly dependent on U.S. regulatory developments. Although ETF inflows remain resilient, Citi has cut its 12-month inflow expectations to $10 billion for Bitcoin and $2.5 billion for Ethereum, but still sees potential in optimistic scenarios—Bitcoin reaching $165,000 and Ethereum $4,488.
5. Julio Moreno, Head of Research at CryptoQuant, wrote in a report: “If Bitcoin continues to rise, it may first encounter resistance near $75,000. This level represents the lower bound of actual on-chain trader prices, which historically act as resistance in bear markets. The next resistance is close to $85,000, corresponding to actual trader prices. After Bitcoin rose from $80,000 to $98,000, this zone acted as resistance in mid-January and October 2025.”
6. AxelAdlerJr, analyst at CryptoQuant, said recent inflows into spot Bitcoin ETFs rebounded, but Bitcoin’s price remains about $5,174 below the ETF’s approximate cost basis (around $80,000). Demand recovery could push prices higher, but resistance near $80,000 may trigger profit-taking. Monitoring macro data is necessary to assess breakout potential.
7. CryptoQuant posted on X that the trend of open interest in Ethereum futures contracts indicates continued liquidity inflows supporting Ethereum’s upward trend, rather than short-term volatility.
