1. What was decided about the rate?
As most expected (the probability was 99%), the rate was kept at 3.50–3.75%. This is already the second "pause" in a row after the cycle of reductions in 2025.
2. Forecasts vs Fact (why is everything falling?)
The market hoped for soft hints but received a "hawkish pause." The main blow came from updated forecasts from officials:
"Dot Plot": In December, the Fed hinted that there would be at least one (and some hoped for two) rate cuts in 2026. Now, due to the conflict with Iran and the surge in oil prices, officials have revised their views. Many of them now do not see any cuts before the end of the year.
Inflation: The inflation forecast for the end of 2026 has been revised upwards (closer to 3% instead of the target of 2%). This means that cheap money will not be available in the near term.
Powell's rhetoric: Jerome Powell (who, by the way, has a term that is soon expiring) sounds extremely cautious. He made it clear: as long as oil is expensive and inflation isn't moving down, the rate will remain "high for as long as necessary."
3. Result for the market
The market "took offense" because hopes for a pivot in monetary policy towards easing have been officially postponed indefinitely.
What’s next? Everyone will now be watching every little move from the conflict zone in the Middle East - if oil doesn’t go down, the Fed will remain on the sidelines.