The US Federal Reserve has decided to maintain its current benchmark interest rate at 3.50% to 3.75%, marking two consecutive meetings without a change. Despite some members projecting one additional rate cut of 0.25% this year, uncertainties have surged regarding potential rate increases due to rising inflation forecasts and the ongoing conflict between Israel and Iran. Fed Chair Jerome Powell highlighted these uncertainties, stating that while one more cut is anticipated, the likelihood of rate hikes remains on the table under certain economic conditions.

The Fed has slightly adjusted its economic projections, maintaining an unemployment rate estimate of 4.4% while revising its economic growth forecast upwards from 2.3% to 2.4%. However, inflation expectations have also increased, with core inflation projections rising from 2.5% to 2.7%, as well as personal consumption expenditure (PCE) inflation rising from 2.4% to 2.7%. Powell indicated that there has been a significant shift among some committee members regarding the expected number of rate cuts this year, suggesting that the Fed is increasingly cautious as economic indicators fluctuate.

Following the Fed's policy announcement, US Treasury yields increased and the dollar index rose from 99.58 to 100.19. Notably, market expectations for continued low interest rates are waning, with current predictions indicating a 54.6% chance that rates will remain unchanged after the last Federal Open Market Committee meeting of the year on December 9. Financial analysts have expressed concern that if the conflict worsens, the market may shift its focus more toward the potential for rate hikes rather than cuts, reflecting the delicate balance the Fed must manage in light of geopolitical tensions and inflation concerns.