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Gold Price Slides Below US$4,900 as Fed Holds Rates Steady Again
Mar. 18, 2026 01:55PM PST
The Fed held its benchmark interest rate at 3.5 to 3.75 percent, pointing to uncertainty concerning the impact of rising energy prices on inflation.
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The US Federal Reserve held its second meeting of 2026 from Tuesday (March 17) to Wednesday (March 18) as the Iran war escalated into a closure of the Strait of Hormuz.
As anticipated, the central bank maintained the federal funds rate in the 3.5 to 3.75 percent range.
The Fed’s decision to hold the line on interest rates for a second time after three consecutive cuts at the end of 2025 was already almost entirely expected, even before the breakout of the current Middle Eastern conflict.
However, the prospect of rate cuts in June is now looking like a non-starter.
“We already had these big question marks,” Chicago Fed President Austan Goolsbee told the Wall Street Journal in a March 6 interview. “It does dovetail energy prices with what’s going to happen with tariffs,” he added.
The Fed has a dual mandate to promote price stability and maximum employment, but now may find itself in quite the predicament if it can’t use its monetary tools to make adjustments to the economy.
For several months now, its board of governors has been split between those concerned with preventing a further slowdown in the US labor market and those fearing the fight against inflation is far from over.
On March 11, the US Bureau of Labor Statistics released consumer price index data that shows headline inflation for February was up by 2.4 percent over the last 12 months. The release of the personal consumption expenditures price index, the Fed’s preferred inflation metric, came a few days later, showing an increase of 2.8 percent for January.
These figures may rise higher in the months ahead if the Iran war continues to impact energy and fertilizer prices, which both have an outsized impact on a broad array of consumer goods and food products.
Meanwhile, Bureau of Labor Statistics data shows that the US economy dropped 92,000 jobs in February compared to 126,000 jobs added in the previous month; the loss was attributed to healthcare sector strikes. The unemployment rate is now at 4.4 percent, up 0.1 percent from the previous month, but still in a healthy range.
Dissent at the Fed lessens
The split between doves and hawks that began in late 2025 was still plaguing the Fed during its first interest rate decision of the year in January, but has now seemingly lessened in light of the current environment.
At this week's meeting, only one Fed official cast a dissenting vote against holding rates steady. Governor Stephen Miran continued his push for a 0.25 percent cut.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated,” explained the Fed in a statement.
“The implications of developments in the Middle East for the U.S. economy are uncertain. The Committee is attentive to the risks to both sides of its dual mandate," the release continues.
During a press conference following the rate decision, Fed Chair Jerome Powell was careful not to commit to any future timeline for rates; instead, he said decisions will be made one meeting at a time.
“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,” said Powell. “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.”
Powell's Fed chair term wrapping up
Powell’s term as Fed chair expires in May of this year. US President Donald Trump has criticized the Fed — and Powell in particular — saying he hasn't lowered rates quickly enough. Trump’s feud with the Fed escalated earlier in the year when the US Department of Justice served the agency with grand jury subpoenas, threatening a criminal indictment over Powell's testimony to the Senate Banking Committee this past June.
“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,” said Powell during a March 18 rate decision press conference.
On January 30, Trump nominated Kevin Warsh, a former Fed governor, to replace Powell as the next Fed chair. While the president was widely expected to name a puppet dove to the position, surprisingly Warsh is considered more of a hawk and is not expected to be in a hurry to lower interest rates unnecessarily.
The Fed board also released its updated Summary of Economic Projections (SEP), known as the dot plot. One of the highlights from the SEP is that the Fed is still projecting at least one quarter-point rate cut in 2026.
Gold, silver prices react to Fed decision
The gold price dropped to US$4,885.50 per ounce after the Fed's decision.
Silver also fell, declining to US$76.85 per ounce. The precious metals are under pressure from a stronger US dollar and profit taking after the massive rallies they experienced earlier in the quarter.
Equities ticked slightly downward following the rate announcement on Wednesday, with the S&P 500 (INDEXSP:INX) falling 0.73 percent to reach 6,666.79. Meanwhile, the Nasdaq-100 (INDEXNASDAQ:NDX) lost 0.66 percent to come in at 24,617.24, and the Dow Jones Industrial Average (INDEXDJX:DJI) was down 0.99 percent, coming to 46,529.39. It seems Wall Street had already factored in the Fed’s decision to hold.
The next Fed rate decision will come on April 29, the last Fed meeting before Powell’s term as chair comes to an end. Most analysts expect interest rates to remain in a holding pattern until possibly the fourth quarter of 2026.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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