Federal Reserve Holds Rates Steady, Signals Two Cuts Possible in H2 2026

The Federal Reserve held its benchmark interest rate steady at 4.25–4.50% at its March 2026 meeting, in a unanimous decision that matched market expectations. The updated Summary of Economic Projections - the so-called dot plot - showed the median FOMC member now anticipates two 25 basis-point cuts before the end of 2026, unchanged from December's projections.

Fed Chair Jerome Powell, in his post-meeting press conference, struck a cautious tone. "We are in no hurry," Powell said, emphasizing that the Fed needs further confidence that inflation is sustainably moving toward the 2% target before reducing borrowing costs. Core PCE inflation stood at 2.6% in February, still above target but trending lower for the third consecutive month.

For GCC markets, the Fed's decision has direct implications. All six Gulf currencies are pegged to the US dollar, meaning GCC central banks typically mirror Fed rate decisions. Saudi Arabia's SAMA and the UAE Central Bank both kept their rates unchanged following the announcement, as expected. Lower US rates later in 2026 would reduce borrowing costs across the region and could stimulate real estate and corporate investment activity.