Wall Street has all but given up on the Federal Reserve cutting interest rates anytime soon, and the central bank’s most closely watched meeting of the year begins on Monday.
The Federal Open Market Committee meets March 17-18 in Washington, with a policy statement scheduled for 2:00 p.m. ET on Tuesday and a press conference from Chair Jerome Powell at 2:30 p.m. The CME FedWatch tool shows a 94% probability that the Fed will hold rates steady at 3.50% to 3.75%, where they have sat since the January meeting.
But the rate decision itself is not the main event. This meeting includes updated economic projections and the closely watched “dot plot,” where each FOMC member maps their expected rate path for the rest of the year. The current median projection shows one 25-basis-point cut for 2026. If that shifts to zero, markets will reprice immediately.
How the Outlook Changed in Three Weeks
Just three weeks ago, traders expected the Fed to begin cutting rates in June, with a second reduction likely in September and an outside chance of a third by year end. That outlook has collapsed. The CME FedWatch tool now prices in no rate cuts before December at the earliest, and some economists see no reductions at all until 2027.
Two events drove the reversal. First, the Trump administration imposed 15% global tariffs that took effect on February 24, raising costs for importers across every sector. Days later, on February 28, the United States and Israel launched joint military strikes on Iran, sending oil prices above $100 a barrel as Iran shut down the Strait of Hormuz and disrupted roughly 20% of global oil supply. West Texas Intermediate crude briefly touched $120 before settling near $100, where it has remained.
Both shocks are inflationary. Together, they have left the Fed facing a problem it has not confronted in decades: rising prices and slowing growth at the same time, a combination economists call stagflation.
The Numbers Behind the Dilemma
Core Personal Consumption Expenditures, the Fed’s preferred inflation gauge, stands at roughly 3.1%, well above the 2% target. At the same time, revised fourth-quarter 2025 GDP growth came in at just 0.7%, dragged down in part by a 43-day federal government shutdown that stripped an estimated 1.5 percentage points from national output.
The result is an economy that is barely growing while prices continue to climb. Cutting rates would risk stoking inflation further. Holding rates steady, or raising them, would squeeze an already fragile recovery. Two FOMC members, Governors Miran and Waller, dissented at the January meeting and called for a 25-basis-point cut, arguing that the labor market was weakening fast enough to justify relief.
What It Means for Business Owners
For entrepreneurs and small business owners, the path of interest rates shapes everything from credit card APRs to the cost of a commercial lease. Mortgage rates have already surged to their highest level since September, with the 30-year fixed average hitting 6.41% as of last week, adding roughly $115 per month to payments on a median-priced home.
Small businesses that depend on imported goods are facing a double hit from tariffs pushing raw material costs higher and elevated energy prices flowing through to shipping, manufacturing, and utilities. Consumer sentiment has dropped to its lowest reading of 2026, and household spending is expected to tighten further if gasoline prices remain above $3.20 a gallon.
What to Watch on Tuesday
The most important signal will come from the dot plot and the Summary of Economic Projections. If the median dot shifts from one cut to zero, it would confirm what markets already suspect: the Fed sees no room to ease this year. If the projections show higher inflation and lower growth than the December estimates, it would mark the Fed’s first formal acknowledgment of the stagflationary risk building in the economy.
Powell’s press conference will also be scrutinized for any mention of Jerome Powell’s own tenure. His term as Fed Chair expires on May 23, and Kevin Warsh, widely viewed as more hawkish, is the leading candidate to replace him. A change at the top could further delay any move toward lower rates.
The meeting begins Monday morning. The policy statement lands Tuesday at 2:00 p.m. ET, followed by Powell’s press conference at 2:30 p.m. For business owners navigating rising costs and tightening credit, what the Fed signals this week could set the tone for the rest of the year.
