The Federal Reserve is widely expected to keep interest rates unchanged at the end of its two-day policy meeting on Wednesday, but markets will be closely watching for signs of how the war in Iran could affect the Fed's inflation and economic growth outlook.

The recent spike in oil prices, driven by the Middle East conflict, has complicated the Fed's picture, as inflation remains above the central bank's 2% target and the labor market slows.

Traders now expect the Fed won't cut rates until October or December, and the central bank is widely expected to hold rates steady in the 3.5%-3.75% range on Wednesday.

Along with its second policy decision of the year, the Fed will also publish its first Summary of Economic Projections (SEP) for 2026, which will include forecasts from Fed officials on economic growth, inflation, and interest rates for the coming years.

Fed Chair Jerome Powell is expected to underscore that the Fed will remain on hold while it monitors the oil shock during his press conference at 2:30 p.m. ET today, one of the last press conferences of his term.

Here are the latest updates and analysis on the Fed's policy decision.

Yahoo Finance's Hamza Shaban writes in today's Morning Brief newsletter:

Read more here.

In addition to the Federal Reserve, several other global central banks are in focus this week as they are expected to deliver policy decisions and address the economic fallout from the Middle East war.

"The supply shock is resulting in a market lowering growth expectations and increasing inflation expectations," Capital analyst Kyle Rodda told my colleague Jake Conley. "That's manifesting in doubts about future profitability and the path forward for global interest rates."

Here's an overview of at the major policy decisions unfolding this week:

Reserve Bank of Australia: The RBA raised the cash rate by 25 basis points to 4.1% on Tuesday as policymakers viewed the war in the Middle East as adding to inflation already deemed too high. For more details on the decision, read Yahoo Finance Australia's coverage here.

Bank of Canada: Canada's central bank is expected to continue to keep borrowing costs at 2.25% on Wednesday as the country navigates moderating growth and the renegotiation of the US-Mexico-Canada trade agreement, as well as the global oil shock.

European Central Bank: The ECB is expected to hold interest rates steady on Thursday, March 19, despite concerns of rising eurozone inflation. ECB policymakers are expected to offer assurances that the central bank won't allow another inflation shock like the one experienced in 2022, when Russia invaded Ukraine.

The Bank of England: The BOE is also expected to keep interest rates unchanged at 3.75% on Thursday. Just two weeks ago, the United Kingdom's central bank was expected to deliver its first of two interest rate cuts of the year, but that calculus changed after data released Friday showed economic growth stagnated in January.

Riksbank: Sweden's central bank is expected to hold rates steady at 1.75% on Thursday.

Swiss National Bank: Switzerland's policymakers are expected to keep rates unchanged at 0% on Thursday.

Read more here.

On Wednesday, the Federal Reserve will print its quarterly economic projections alongside its decision. This summary, also known as the "dot plot", offers insights into what the Fed will do in the short term.

Yahoo Finance's Sarah C. Brady writes:

Learn how to read the Fed's dot plot here.

The Federal Reserve signaled in January that it would hold off on raising rates for an undetermined period. That raises the question: What does this mean for mortgage rates?

Yahoo Finance's Hal Bundrick explains that the Federal Reserve and mortgage rates are working on two ends of a timeline. The Fed steers short-term interest rates, and mortgage rates are influenced by long-term bonds.

That means mortgage rates are priced to a longer-term benchmark, such as the 10-year Treasury. The bond market generally reacts to longer-term events, such as inflation, employment, and macroeconomic trends.

He writes:

Read more here.

US stocks cautiously rebounded for the second day in a row on Tuesday as the Fed's two-day policy meeting began. And while stocks often react to expectations of the Fed's policy actions and to those actions themselves, the markets' focus has largely been on crude oil prices and the outlook for inflation.

As of Tuesday, traders were pricing in a 98.9% chance that the Fed keeps interest rates at the same level tomorrow, according to CME FedWatch. The other 1.1% of traders expect a 25 basis point rate hike — a turn from the sliver of traders betting on a rate cut just a month ago.

The Federal Reserve doesn't directly oversee markets, its actions can affect sentiment and ripple through equities, bonds, and other asset classes. As Yahoo Finance's Catherine Brock points out, investor expectations can trigger stock price swings when those expectations diverge from the Fed’s decision.

Or as David Russell, global head of marketing strategy at trading platform TradeStation, explained, “The Fed’s main impact on the stock market is to confirm or reject expectations about rates and the economy.”

Read more here about how the Fed affects stocks.

The oil shock from the war in the Middle East raises three major questions for the central bank this week: How will the surge in energy prices impact inflation expectations? Will higher oil costs bleed through to core prices? And how will the Fed respond?

Yahoo Finance's Jennifer Schonberger reports:

Read more here.

The federal funds rate influences savings rates, interest charges, and, to a small degree, mortgage rates. Wall Street traders, as measured by federal funds futures trading, put the next rate cut no sooner than October.

Yahoo Finance's Hal Bundrick breaks down how the continuing rate pause may impact deposits, credit, and debt:

Read more here.

The Federal Open Market Committee (FOMC) meeting began at 10:30 a.m. ET as scheduled, a Federal Reserve spokesperson said.

The FOMC, the Federal Reserve's group responsible for setting monetary policy, is meeting for the second time this year. In January, the FOMC voted to hold interest rates steady following three rate cuts last fall. At the meeting, officials said the job market showed “some signs of stabilization” and suggested they would hold for a while to assess economic data before making further adjustments to the federal funds rate.

The FOMC will release its policy decision at 2 p.m. ET on Wednesday after the meeting concludes. Fed Chair Jerome Powell will then give a press conference at 2:30 p.m. ET on Wednesday, which will be livestreamed.

The press conference is expected to be the second-to-last one Powell gives as Fed chair before he steps down in May.

The war in Iran has put global central banks in an awkward position: Just as inflation pressures were easing, a surge in energy prices has raised inflation risks once again, while policymakers also face the risks of slowing economic growth.

Yahoo Finance's Jake Conley reports:

Read more here.

The context for the Federal Reserve's two-day March policy meeting has changed significantly in the past two weeks, as the war in Iran shows little sign of moderating and oil prices remain around $100 per barrel.

Although the central bank is expected to stay the course and keep interest rates unchanged in a range of 3.5% to 3.75%, uncertainty around the duration of the conflict has raised questions about the path of policy for the rest of the year.

As my colleague Jennifer Schonberger notes, the oil shock from the Iran war could deepen divisions within the central bank on the inflation outlook.

She writes that a few weeks ago, the big debate inside the Fed was how far rates are from neutral — a level on the Fed’s benchmark policy rate designed to neither boost nor slow economic growth. Now the picture is changing and will be defined largely by how long the war in Iran lasts and how long high oil prices linger.

Officials will release the quarterly “dot plot” — a graph that charts how many interest rate cuts each Fed member sees for this year and next. But economists say they are giving less weight to the projections, given the uncertainty around the duration and impact of the war.

Read more about what to expect at this March's Fed meeting here.