The United States Federal Reserve is set to announce its interest rate decision on Wednesday, with markets widely expecting the Federal Open Market Committee (FOMC) to keep rates unchanged in the range of 3.5%-3.75% for the third consecutive meeting in April [1][3]. This meeting is anticipated to be Jerome Powell’s final as Fed Chair, with his term ending in over two weeks and Kevin Warsh expected to succeed him following the Department of Justice dropping its investigation [1].
The decision comes amid heightened uncertainty in the Middle East, which has driven energy prices higher and strained the Fed’s dual mandate of maintaining inflation at 2% and full employment [1][2][3]. U.S. gas prices have surged to $4.23, the highest since the start of the war with Iran, with Brent crude rising above $114, up nearly 25% from its recent low on April 17 [3]. Gasoline prices have climbed $1.25 a gallon, or more than 30%, since late February [3]. The dual blockade of the Strait of Hormuz by the U.S. and Iran has contributed to these price increases, and the United Arab Emirates has announced its intention to leave OPEC, potentially increasing oil production [3].
Market participants see little to no chance of a rate cut until at least September, with an 80% probability that rates will remain unchanged through the end of 2026, according to the CME FedWatch Tool [1]. Earlier expectations for multiple rate reductions have been tempered by surging oil prices and their impact on inflation [1]. The Fed’s revised Summary of Economic Projections (SEP) from March indicated a median projection of a 25 basis points cut this year, unchanged from December 2025, but minutes from the March meeting highlighted concerns that persistent oil price increases could keep inflation elevated and even necessitate rate hikes [1].
Analysts at TD Securities expect the Fed to maintain its policy rate, noting a balanced labor market and rising headline inflation due to the oil shock. They anticipate Powell will remain neutral and avoid comments on succession [1]. ING strategist Francesco Pesole suggests Powell’s final press conference may lean hawkish, with risks of a positive dollar reaction if Powell surprises markets, especially as US equities face volatility and key tech earnings releases [2]. Pesole also notes that higher fuel and airline prices are pushing CPI toward 4%, but the Fed views this as a supply shock rather than a demand-driven inflation spiral [2].
According to [1], the Fed’s stance and Powell’s comments are expected to drive the US Dollar’s performance, while [2] highlights that recent dollar recovery was short-lived and influenced by equity jitters and geopolitical tensions. The ongoing conflict in the Middle East and uncertainty over the Strait of Hormuz continue to weigh on market sentiment and inflation expectations [2][3].
CONCLUSION
The Federal Reserve is expected to keep interest rates unchanged at Jerome Powell’s likely final meeting as chair, amid surging oil and gas prices driven by Middle East tensions. Analysts and market tools indicate little chance of near-term rate cuts, with inflation risks remaining elevated. Powell’s comments and the Fed’s policy stance are set to influence the US Dollar and broader market sentiment, as investors remain cautious in the face of geopolitical uncertainty.