The United States (US) Federal Reserve is expected to keep interest rates unchanged at its policy meeting tomorrow, according to analysis from The Common Sense, as inflation pressures remain above the central bank’s long-term target.

The Federal Reserve’s benchmark rate is currently in a range between 3.5% and 3.75%, and the latest inflation data suggest policymakers are unlikely to move immediately toward easing monetary policy.

Headline consumer inflation in the US stood at 2.4% in February. However, the Fed’s preferred measure of inflation, core personal consumption expenditures (PCE), remains higher at 3.1%, still well above the Fed’s 2.0% target.

Rising oil prices are also complicating the outlook. The increase in international crude prices has begun feeding into inflation expectations, a key variable closely monitored by the Fed. Market-based measures show that the two-year break-even inflation rate has climbed to 3.2%, up from 2.9%, marking the highest level since April 2025.

That expectation is tied partly to geopolitical developments. Should tensions around the Iran War ease, the bulk inflationary pressure linked to higher oil prices may also subside.

See TheCommon Sense reporting on sixIran War scenarios here.

Beyond Wednesday’s decision, The Common Sense has also reported at length on how the incoming Fed boss is most likely a “hawk in dove’s clothing”.

Despite these pressures, The Common Sense still expects the Federal Reserve to cut rates by 50 basis points this year.

Political considerations will weigh heavily on the economic narrative in Washington. Analysts note that the US administration is likely aware of the need, particularly ahead of midterm elections in November, to shift public attention toward the domestic economy and household living standards.

For now, however, the combination of persistent inflation and rising energy costs means the Federal Reserve is expected to adopt a cautious stance, holding rates steady while monitoring both global markets and geopolitical risks.