FOMC set to hold rates as Iran war clouds outlook

Binaya Dahal

Journalist

28 April 2026

The Federal Open Market Committee (FOMC) is “all but certain” to leave the federal funds target range unchanged at its April 29 meeting as the economic fallout from the Iran war continues to cloud the outlook.

MFS Investment Management’s chief economist and portfolio manager Erik Weisman and fixed income research analyst Kish Pathak said the broad message from the FOMC will be that policy is in a good place to “wait and watch” how the growth and inflation conditions evolve.

“On March 18th, Chair Powell went out of the way to downplay the Statement of Economic Projections given the uncertainty related to the conflict,” they said.

“He is likely to reiterate the “conflict dependency of the outlook” as uncertainty related to the Iran war has declined since then but remains very high still.”

They said markets will nonetheless scrutinise any shift in nuance from Powell regarding how the FOMC now reads both the growth and inflation sides of its mandate.

“The minutes of the March meeting indicated that there is an emerging minority view that rate hikes might be required to guard the inflation side of the mandate.”

Powell is likely to face questions about what conditions could tilt the committee toward tightening, though MFS expects him to hold that it is too early to make such a judgement.

That stance would align with the bulk of Fed communications since March, which have consistently emphasised balance between the two-sided risks to the dual mandate.

The two-day meeting, starting Tuesday, could also be Chairman Powell’s last if the Senate confirms Kevin Warsh as his successor in the coming weeks.

MFS expects Powell to again face questions over whether he will stay on as a governor once his chairmanship ends, and whether a potential dropping of the DOJ probe would change his thinking. “He will likely repeat that he has not made up his mind yet,” MFS said.