CME FedWatch, which estimates probabilities of the Fed’s choices based on market moves, is predicting a near-total chance of an interest rate hold. Holding rates steady could help temper inflation, at the risk of leaving an already sluggish labor market without support. Fed leaders will have to weigh both ends of their dual mandate, which focuses on stable prices and maximum employment.

Powell was optimistic at the January meeting: “The US economy expanded at a solid pace last year and is coming into 2026 on a firm footing,” he said. “While job gains have remained low, the unemployment rate has shown some signs of stabilization, and inflation remains somewhat elevated.” However, with rapidly shifting oil prices, the committee’s inflation outlook may now be more tempered.

Central bank leaders last met in late January. Since then, the Bureau of Labor Statistics reported a loss of nearly 100,000 jobs, the Supreme Court voted down many of President Donald Trump’s tariffs, and the US began a war with Iran that cut off a large part of the world’s energy supply.

If the FOMC wasn’t already feeling cautious about monetary policy, they are now.