Fed likely to keep rates on hold as it confronts new inflation threat: Soaring gas prices

Traders expect the Fed to keep interest rates on hold as it confronts the Iran war threat of new inflation driven by higher gas prices.

The Federal Reserve's decision on interest rates Wednesday is all but a foregone conclusion. Traders overwhelmingly expect it to keep rates on hold, a scenario that's likely to persist for the rest of the year.

Instead, it's how Chair Jerome Powell and policymakers decide to respond to the growing Middle East oil crisis that will have investors and consumers hoping for interest rate cuts alike on the edge of their seats when Powell steps up to the lectern at the central bank's headquarters at 2:30 p.m. ET.

When the United States and Israel attacked Iran on Feb. 28, the Islamic Republic responded in part by blockading the Strait of Hormuz, a crucial transit route for oil from the Middle East.

Overnight, the cost of crude oil soared. The price of gasoline quickly followed.

As of Wednesday, U.S. crude oil prices are up more than 40% and the average retail price of unleaded gas in the country had risen more than 75 cents a gallon since the war began.