Fed meeting recap: Powell says inflation isn’t coming down as much as ‘hoped’

With fears of higher oil prices heating up inflation while weakening growth, Fed Chair Powell said that he wouldn't use the term "stagflation" to describe the U.S. economy.

"I always have to point out that that was a 1970s term, at a time when unemployment was in double figures and inflation was really high," he said. "We actually have unemployment really close to longer-run normal, and we have inflation that's 1 percentage point above that."

He added, "I would reserve the term stagflation for a much more serious set of circumstances."

The Fed's summary of economic projections revealed a higher inflation forecast compared with previous estimates, but also stronger growth. Powell said that was due to productivity gains that members of the Federal Open Market Committee expect to see.

— Davis Giangiulio

Powell indicated he will remain as Fed chair until an investigation involving the central bank's headquarters is over, and in any event will stay on until his successor is officially confirmed.

"On the question whether I will leave while the investigation is ongoing, I have no intention of leaving the board until the investigation is well and truly over with transparency and finality," he said.

Further, he addressed the issue of whether Kevin Warsh isn't confirmed as Powell's successor. Sen. Thom Tillis, R-N.C., has said he will hold up the nomination in the Senate Banking Committee until a Justice Department probe into the remodeling is resolved.

"On the question of whether I will then continue to serve as the governor after my term ends and after the investigation is over, I have not made that decision yet, and I will make that decision based on what I think is best for the institution and for the people we serve," he said.

—Jeff Cox

The Fed has to balance what is happening in the labor market as well as inflation risks, which can make it difficult to make a decision on rate cuts, Powell said.

"We are balancing these two goals in a situation where the risks to the labor market are to the downside, which would call for lower rates, and the risks to inflation are to the upside, which would call for higher rates or not cutting anyway," he said.

"So we're in a difficult situation, and we feel like … our framework calls on us to balance the risks, and we feel like where we are now is just kind of on that borderline, the higher borderline of restrictive versus not restrictive," he added.

— Michelle Fox

Fed Chair Powell said that shocks resulting from surging oil prices could certainly weigh down the U.S. economy.

"The net of the oil shock will still be some downward pressure on spending and employment and upward pressure on inflation," he said.

But he added that these shocks could be offset by higher energy production in the U.S.

"We're a net exporter of energy, right? So any effects on employment and economic activity and spending would be offset to some extent, by the fact that our oil companies will be more profitable, and they may even do more drilling," he said.

Powell added that oil companies would only do more drilling if they see a consistent and persistent rise in prices. "They're going to make a reasoned, careful judgment that we're going to have higher oil prices for an extended period," he said.

— Lisa Kailai Han

Powell said there's uncertainty tied to oil prices amid the U.S.-Iran war.

"The U.S. economy is doing pretty well," Powell said.

But, "we don't know what the effects of this will be," he said. "Really, no one does."

— Alex Harring

The major averages slid to their lows of the day as Fed Chair Powell said that the central bank wasn't making as much progress on bringing down inflation as it had hoped.

"The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation," Powell said at his press conference.

At their session lows, the Dow Industrials slid more than 600 points on the day, or 1.3%, while the S&P 500 and the Nasdaq Composite fell 0.9%.

—Darla Mercado

Fed Chair Powell said while the central bank's projection is that inflation will ease this year, the progress isn't as quick as they would like.

"The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation," he said. "It should come as we start to see in the middle of the year, progress on tariffs... going through once and then tariff inflation coming down."

However, while the Fed's projections forecasted two more rate cuts — one this year and another in 2027 — he acknowledged that could change if inflation remains stubborn.

"The rate forecast is conditional on the performance of the economy, so if we don't see that progress, then you won't see the rate cut," he said.

— Davis Giangiulio

Correction: An earlier version of this blog post misstated the Fed's forecast for rate cuts. The central bank's dot plot suggests there will be one cut in 2026 and another in 2027.

The Fed's monetary policy is not following a fixed path, Chair Powell reiterated on Wednesday.

"Monetary policy is not on a preset course and we'll make our decisions on a meeting by meeting basis," he said.

"The Fed has been assigned two goals for monetary policy: maximum employment and stable prices," Powell added. "We remain committed to supporting maximum employment, bringing inflation sustainably to our 2% goal, and keeping the longer term inflation expectations well anchored."

—Michelle Fox

Surging oil prices due to the Iran war are expected to increase inflation in the near term, Powell said.

"Near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East," the Fed chair said.

"In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy," he said.

— Spencer Kimball

The Fed's decision to leave rates unchanged was expected, but the excitement lies within the details, said Art Hogan, B. Riley Wealth chief market strategist.

The inflation forecast was revised to 2.7% from 2.5%, while the median rate in the "dot plot" and the split on cuts versus not cuts remained unchanged, he said.

"There was still one dissenting vote from Stephen Miran who is on auto-rate-cut-pilot," Hogan said. "All in a slightly less hawkish decision than had been anticipated."

—Michelle Fox

The U.S. Fed on Wednesday became the latest central bank to acknowledge the U.S.-Iran war's economic impact.

In its closely watched statement released Wednesday, the U.S. Fed said that "the implications of developments in the Middle East for the U.S. economy are uncertain."

The Bank of Canada on Wednesday said the war "increased" volatility in global energy prices and within financial markets. The central bank said it also "heightened the risks to the global economy," while acknowledging that it was "too early" to assess its impact to national growth.

The Reserve Bank of Australia on Tuesday said higher fuel prices as a result on the conflict could push up inflation if sustained.

"Short-term measures of inflation expectations have already risen," Australia's central bank said in a statement. "As a result, the Board judged that there is a material risk that inflation will remain above target for longer than previously anticipated."

— Alex Harring

The Federal Reserve is in an "wait and see" mode, awaiting clarity on the Iran war developments, but could still have the capacity for two more rate decreases this year, said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management.

"Despite higher inflation forecasts the FOMC retains an easing bias, with a narrow majority on the committee expecting cuts to resume this year," she said. "We still see room for two 'normalization' cuts in 2026, although their timing remains dependent on the length of the conflict.

—Michelle Fox

The Fed acknowledged the ongoing U.S.-Iran war in its meeting statement released Wednesday.

"The implications of developments in the Middle East for the U.S. economy are uncertain," the statement reads.

See what's new in the statement here.

— Alex Harring

For Americans struggling in the face of affordability challenges, the central bank's announcement does little to ease budgetary pressures.

Short-term rates, like credit card APRs, are closely pegged to the prime rate, which is typically 3 percentage points above the federal funds rate, and those are staying put for now.

At the same time, oil and gas prices have shot up, as have the yields on 10-year Treasurys, which are the benchmark for mortgage rates and other longer-term rates.

From mortgage rates and credit cards to auto loans and savings accounts, here's how the Fed's March decision will influence your wallet.

—Jessica Dickler

The Federal Reserve kept its key interest rate unchanged at a target range of 3.5% to 3.75%.

Central bank policymakers also highlighted "uncertain" impacts from the Iran war. The Fed's outlook still calls for one cut this year, even as oil prices have surged.

Read more from CNBC's Jeff Cox about the rate policy announcement here.

—Darla Mercado

The three major averages were lower around 1:40 p.m. ET, as the Fed's interest rate announcement approached.

The S&P 500 was down 0.7%, and the Nasdaq Composite was off about 0.7%. The Dow Industrials were last lower by roughly 450 points, or nearly 1%.

The 10-year Treasury note yield inched higher by 2 basis points to 4.23%, while the rate on the 2-year note added nearly 4 basis points, trading at 3.714%.

—Darla Mercado

Inflation worries are spiking, thanks to a hot wholesale inflation reading on Wednesday, and that's spurring traders to consider the likelihood that the Fed may not be cutting rates until much later this year.

The producer price index reading for February came in at 0.7%, surpassing the Dow Jones consensus of 0.3%. At the same time, oil prices have been on a runaway surge, with Brent crude futures up nearly 50% since the start of the Iran War.

Fed funds futures trading is now looking at a less than 60% likelihood that the central bank will ease up on policy in December, according to the CME FedWatch tool.

Read more from CNBC's Jeff Cox on the market's changing outlook for rate cuts.

—Darla Mercado

Central bank policymakers are expected to keep their key interest rate on hold at their target range of 3.5% to 3.75% at the conclusion of their March meeting.

Federal Reserve policymakers will be issuing their quarterly updates to economic and rate projections this time, as well.

The real event, however, will be what Fed Chair Powell will say at the press conference slated for 2:30 p.m. The economic picture has changed since the central bank leader last took the podium in January: Oil prices have been surging amid the Iran war, and the latest inflation reading – the producer price index for February – was hotter than anticipated.

Traders will look for clues on what could be next for policy with these new factors in play.

Read more from CNBC's Jeff Cox on what to expect from the Fed's decision here.

—Darla Mercado