The US Federal Reserve (Fed) said on Wednesday that it would keep interest rates unchanged at its first meeting in 2026, while continuing to monitor financial and international developments.
Federal Reserve policymakers on Wednesday kept interest rates on hold, a move that was largely expected given the recent rise in inflation and the ongoing conflict with Iran.
The decision is a departure from the three rate cuts that occurred as a result of the 2025 Fed meeting. During the year, the committee withstood repeated pressure from the Trump administration to lower interest rates until it was satisfied that rising unemployment would not result in a corresponding flare-up of inflation.
“Uncertainty about the economic outlook remains high, and the impact of developments in the Middle East on the U.S. economy is uncertain. The Committee is mindful of the risks on both sides of its dual mandate,” the Fed said in a statement today.[,]This includes “supporting maximum employment and returning inflation to the 2% target.”
In a comment, the Fed left open the possibility of future rate cuts, writing:[t]The Committee stands ready to adjust its stance on monetary policy as appropriate if risks arise that impede the Committee’s goals. The Committee’s assessment takes into account a wide range of information, including readings about labor market conditions, inflation pressures and expectations, and financial and international developments. ”
Although the Fed does not set mortgage rates, its decisions affect how much it costs borrowers to take out a loan to buy a home. As a result, today’s Fed moves are being closely watched by pundits and real estate experts, many of whom are keen to understand the spring market.
Adding to the uncertainty was a sharp 10.9% drop in mortgage applications last week, mainly due to rising interest rates and turmoil overseas. Joel Kang, vice president and deputy chief economist at the Mortgage Bankers Association, cited factors such as “conflicts in the Middle East” in comments on the data.[,]” Rising oil prices and “the risk of a broader inflation shock” are seen as having a potential impact on the mortgage market.
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