Fed divided on rate cuts as Middle East tensions add to policy uncertainty

Minutes from the Federal Open Market Committee meeting showed a divided view among policymakers on whether tensions in the Middle East could push the central bank toward rate cuts before the end of 2026.

The US Federal Reserve released details from its March 17–18 meeting on Wednesday. Officials voted 11–1 to hold interest rates steady in the 3.5% to 3.75% range, with caution dominating discussions as geopolitical risks remained uncertain.

Concerns around inflation stayed central to the outlook.

“Many participants judged that, in time, it would likely become appropriate to lower the target range for the federal funds rate if inflation were to decline in line with their expectations.”

Officials also made clear that timing remains unclear, as policymakers described it as “too early to know how developments in the Middle East would affect the U.S. economy,” leaving future policy decisions dependent on incoming data.

Interest rate cuts often act as a tailwind for crypto markets since lower borrowing costs tend to increase available liquidity. The last adjustment came on Dec. 10, 2025, when rates were reduced by 25 basis points.

Some members, however, warned that easing is not the only option. The discussion included the possibility of tightening if inflation stays elevated. 

“Some participants judged that there was a strong case for a two-sided description of the Committee’s future interest rate decisions,” the minutes said, adding that rate hikes could still be appropriate if inflation remains above target.

Labor market conditions also came under scrutiny, as officials pointed to weak job growth, arguing that conditions “appeared vulnerable to adverse shocks,” which also raises concerns about how the economy could respond to external stress.

Data from CME Group shows a 75.6% probability that rates will remain unchanged at the December meeting. The chance of a cut stands at 20.4%, while the likelihood of a hike remains limited at 2.4%.

The next policy decision is scheduled for April 28–29, where officials are expected to reassess both inflation trends and geopolitical developments.