US Fed Meeting Live: All Eyes On Powell After Producer Inflation Jumps Dashing Hopes Of Cooling Prices

As the Iran war wages on, some of the key American defense stocks rose ahead of the FOMC rate cut decision. Lockheed Martin Corp. jumped 1.25% to $644, while Northrop Grumman rose 0.5% to $728.02.

Federal Reserve's fund rate is a primary lever for the US economy. The Fed prefers inflation to rise by 2% and for the labor market to be as fully employed as possible without causing inflation to go beyond that target rate.

In cases economic growth remains sluggish and prices rise slow, the Fed instigates rate cuts to give the economy a liquidity boost. 

S&P 500 and Nasdaq traded 0.60% lower at 6,675.44 and 22,347.11 respectively. Dow Jones slipped 1% to 46,530.06. 

In the wee hours of March 18 (EST), President Donald Trump took to his social media platform truth social to take yet another jibe at Fed Chair Jerome Powell.

"When is “Too Late” Powell lowering INTEREST RATES? President DJT," Trump remarked.  

US wholesale inflation unexpectedly accelerated in February from a month earlier, reflecting higher costs for goods and services prior to the war in Iran.

The producer price index rose 0.7% after a 0.5% gain in the prior month, according to Bureau of Labor Statistics data out Wednesday. An underlying gauge of wholesale inflation that excludes food and energy increased 0.5%.

US Fed will unveil new economic projections, marking a prediction whether their firm stand against inflation with a continued tight monetary policy will play out this year or rate cuts will be needed to offset an economic slowdown. Given the current uncertainty, Wall Street economists believe that the easiest approach now may be to stay close to December's monetary policy outlook, which showed a median forecast of just one rate cut this year.

Crude oil prices rose on Wednesday amid the on-going Iran War. Global benchmark Brent Crude rose over 6% to $109.74 per barrel fuelling inflation fears. 

Iranian control over the Strait Of Hormuz has mounted strain on oil supply world-wide, stirring chaos in the oil market. 

Dow Jones slumped nearly 1%, shedding over 400 points to trade at 46,570.64 within one hour of market open. Losses in big tech weighed on the Nasdaq index which slipped over 0.7% to 22,317 and S&P 500 declined 0.7% to 6,670.15.

Wall Street traders have ramped up bets that rate cuts will start in June. The stakes are high for Fed chair Jerome Powell as faces a litmus test amid the current external risks due to the Iran war-led impact to the economy. Additionally, Powell will deliver his second-last policy review verdict as the Fed chair before the April meeting. US Fed is transitioning to a new leader, Kevin Warsh, nominated by Trump and expected to eventually win Senate confirmation to take over from Powell after mid-May. The June FOMC meeting could be Warsh's first as Fed chief if he is confirmed by the US Senate in time. 

The intense US and Israeli airstrikes and Iranian counterattacks have all but closed the strategic Strait of Hormuz. It provides the only sea passage from the Persian Gulf to the open ocean and is one of the world's most strategically important choke pointsEven at this point, President Donald Trump has set out no clear set of objectives or timeline for ending the war.

The US central bank will draft a policy outlook while balancing the current dynamics of a waging geopolitical war, rising commodity costs and weaker hiring. This has put the Fed in a "stagflation" phase that policymakers last year had thought they could avoid. The FOMC is expected to hold interest rates steady at its policy meeting on Wednesday, as per global market experts.

According to most market analysts, US Fed policymakers are more likely to strike a cautious if not an outright hawkish tone this week. US inflation is mired about a percentage point above the central bank's target and is poised to move higher, particularly if oil prices that jumped almost 50% in two weeks remain elevated. Amid the high risk premium due to the Iran war, US Fed will have to weigh whether the developing economic shock and higher consumer prices results in tighter financial conditions.

The US Federal Reserve is set to announce its interest rate and monetary policy decision on Wednesday, March 18, after a two-day Federal Open Market Committee (FOMC) meeting amid the ongoing geopolitical tensions with Iran. The upcoming interest rate verdict will be the second last policy review for Jerome Powell before his term as Fed Chairman ends on May 15, 2026. The Federal Open Market Committee (FOMC) had cut the federal funds rate by a quarter-point twice last year to 3.75%-4.00%.

The main US stock market indices opened in the red on Wednesday ahead of the Federal Reserve's rate cut decision. Government's producer price index data also stirred inflation fears as prices accelerated unexpectedly. 

S&P 500 opened 0.33% lower at 6,693.61, erasing previous day's gains. Similarly, tech-heavy Nasdaq Composite opened 0.37% lower at 22,396.32 and Dow Jones Industrial Average ticked 0.36% lower to 46,825.16.