New economic projections signal a tricky Federal Reserve path

The Federal Reserve will hold interest rates steady Wednesday while releasing economic projections showing how it plans to navigate simultaneous pressures: inflation running at 3.1% annually in January, above the Fed's target, alongside weakening labor data that showed essentially no net job creation in February and December combined. The central question is whether the median Fed official still expects rate cuts in 2026 or now anticipates holding rates through year-end, a shift that would signal a more hawkish stance than the December projection of one cut. The projections will also set policy expectations for incoming Fed chair Kevin Warsh as an oil shock from the Iran war threatens to push inflation higher and complicate the central bank's decision on whether to cut rates or hold firm. Policymakers face a stark choice: dismiss the supply shock's inflationary effects or maintain higher rates to prevent price pressures from accelerating further.