The Federal Reserve kept its key interest rate unchanged on Wednesday for a second straight meeting, holding the short-term policy rate at about 3.6% as it weighed the outlook for inflation and economic growth amid heightened uncertainty from the Iran war. In a news conference following the decision, Chair Jerome Powell emphasized that the economic impact of the conflict is unclear and could alter the path of prices in either direction.

Powell said the central question for the Fed is whether inflation progress continues, noting that the next steps on rates depend on additional evidence that prices are moving in the right direction. He tied the Fed’s rate-cut expectations to the performance of the economy, saying that if that progress does not show up, the next cut would not occur.

“We just don’t know,” Powell said, describing uncertainty about how the Iran war will affect the United States economy. He added that “The economic effects could be bigger, they could be smaller, they could be much smaller, they could be much bigger,” while underscoring that the Fed can’t yet quantify the conflict’s broader implications for inflation and growth.

Powell also addressed a separate issue that has complicated the Fed’s leadership timeline. He said he has “no intention” of leaving the central bank until an investigation into his congressional testimony about the Fed’s building renovation is dropped. Powell’s term as chair is scheduled to end on May 15, and President Donald Trump has nominated Kevin Warsh to replace him, though Warsh’s confirmation has been delayed as Republican senators have opposed the DOJ probe. Even after the investigation is resolved, Powell said he had not decided whether to remain on the board to complete his term as a Fed governor, which runs until January 2028.

The Fed’s quarterly economic projections released Wednesday showed policymakers maintaining their forecast for one more rate cut this year. In those projections, Fed officials expected inflation to finish 2026 at 2.7%, after a January rate of 2.8% under the Fed’s preferred measure. They also projected core inflation—excluding food and energy—to end the year at 2.7%, and estimated unemployment would hold at 4.4%.

Officials’ remarks reflected the challenge of reading inflation signals while energy prices swing. Wednesday, gasoline prices rose to a nationwide average of $3.84 a gallon, according to AAA, up 92 cents from a month earlier, a move that could lift headline inflation in the near term even if the higher prices later unwind. The Fed’s views also leaned on the idea that supply shocks can fade after they end, potentially reducing the need for additional rate increases.

Even so, the decision came with signs the Fed still faces a difficult data balance. Powell said the Fed reduced its short-term rate three times last year to 3.6% before pausing in January and again on Wednesday, and he indicated that further cuts require continued progress in inflation as the effects of tariffs diminish. Nathan Sheets, chief economist at Citi and a former Fed economist, said Fed officials “are aware they’ve missed their inflation target for five years, and they do not want to continue to miss it indefinitely,” pointing to the Fed’s own inflation measure of 2.8% in January and its 2% target.

The Fed also faced uneven labor-market signals alongside stubborn price dynamics, with businesses shedding 92,000 jobs in February and the unemployment rate ticking higher to 4.4% from 4.3%, according to the government report referenced in the AP story. In the Fed’s own internal debate, one official, governor Stephen Miran, dissented in favor of a quarter-point cut; Miran was appointed by Trump last September. Tim Duy, chief economist at SGH Macro, said the Fed’s forecasts were “stale,” arguing that policymakers were not fully taking into account the impacts of the Iran war on the economy.