The Iran war is clouding the Fed’s forecast for the US economy

Fed officials are set to announce their latest rate decision Wednesday afternoon, along with a new forecast for the path of the American economy as the war in Iran stretches on.

• The Federal Reserve’s rate-setting committee is meeting this week against a backdrop of war, an energy crisis, rising costs, a probe of the Fed chair and ongoing attacks on the central bank’s independence. • Fed officials were expected to cut rates at least once this year, but economists now say all bets are off after the US and Israel launched a war with Iran. • The conflict in the Middle East has created an energy price shock that could push up the cost of consumer goods and reignite the higher inflation the Fed has been trying to contain since 2022. • Still, markets overwhelmingly expect the central bank will on Wednesday afternoon announce a pause, leaving interest rates in the 3.5% to 3.75% range. After eight years serving as chair of the Federal Reserve, Jerome Powell has, after this week’s meeting, just one more monetary policy meeting left in the position. But there’s a chance his time as chair will extend beyond May 15, when it officially expires. That’s because the Senate Banking Committee has yet to announce a date for a hearing to consider President Donald Trump’s nominee to replace Powell, former Fed Governor Kevin Warsh. If Warsh isn’t confirmed by May 15, it’s likely Powell will become acting chair.