Fed Holds Rates Steady, but Says Iran War Causing Economic Uncertainty

0:00Voices are powerful things. At Vanguard, investors are also owners, and their voices are heard. And now with investor choice, they have an even greater voice when investing. It's just another reason millions of investors have turned to Vanguard for 50 years. 50 million investors, 50 million voices. Vanguard. Vanguard is owned by its funds, but are owned by Vanguard's fund shareholder clients to learn more, visit Vanguard.com. All investing is subject to risk, Vanguard Market Incorporation Distributor, figure as of January 2025. The Fed holds rates steady, but the war with Iran clouds its outlook for future decisions. Plus, oil prices rose again today after new attacks on Middle East energy infrastructure, and how U.S. Marines could help reopen the Strait of Hormouth and get oil flowing again. This unit is typically used for raids or special operations. It seems likely that the U.S. Marines that are being sent to the Middle East could be deployed to the U.S. would be deployed to see some of the islands

1:00off of the southern coast of Iran. It's Wednesday, March 18th. I'm Alex Osula for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. The Federal Reserve held interest rates steady today for the second meeting in a row. And for later this year, officials kept open the possibility of cutting raids, even as higher energy prices from the Iran War, threatened to make bringing down inflation more difficult. For more on the Fed's decision, I'm joined now by WSJ Economics reporter, Matt Grossman. Matt, how did officials talk about the prospect of rising inflation due to higher energy prices? Do they see it basically as a guarantee or are they still going to kind of wait and see? Well, at his press conference stage, Chair Powell talked about the effects of the war in Iran as highly uncertain. The implications of events in the Middle East for the US economy are uncertain. In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration

2:03of the potential effects on the economy. What he did point to was the risk that some of the inflation that was already part of the economy before the conflict started could stick with us and that the Fed has been a bit frustrated that they haven't seen more progress on that so far this year. The Fed officials make projections about future rate cuts and increases have those changed at all. The top line result is that the median Fed official penciling in one interest rate cut over the rest of this year. Under the surface, there were some officials who previously thought the Fed could cut several times. You narrowed that forecast a little bit seeing less of a path toward more than one cut this year. So there wasn't a dramatic change in the rate projections, but in his press conference, Chair Powell really emphasized that the Fed isn't just concerned about the Iran conflict as far as more rate cuts go, that they also really want to see more progress on some of the underlying inflation

3:05and the tariff driven inflation before they think about bringing rates down farther. He mentioned that there were a couple people at today's meeting who suggested that a potential rate hike might be a possibility in the future, although he did emphasize that that is not the view of most of the people on the committee. President Trump has continued to put pressure on the Fed as recently as this week, in fact, to cut rates. Did we see that have an impact today? Well, Powell only talked briefly about the investigation that he's been facing. He has said as part of Trump's pressure campaign to influence how the Fed sets rates. Powell's term as a chair of the Fed ends in May, but even after May, Powell would have the opportunity to stay on the Fed in his role as a governor, a member of the board. And today, Powell reiterated something that came up in a legal filing last week, which was that he really wants to stay in that position until the investigation wraps up.

4:06And while I'm at it, on the question, whether I will leave while the investigation is ongoing, I have no intention of leaving the board until the investigation is well and truly over. In other words, doesn't want to leave under duress. That was WSJ Economics reporter, Matt Grossman. Thanks, Matt. Thanks. Powell's comments about rising oil prices and the effect on US economic growth since stocks tumbling, closing near session lows. The Fed meeting left investors thinking future rate cuts were less likely. All three major US indexes ended more than 1% lower with the Dow leading the losses falling 1.6%. Meanwhile, more attacks on Middle East energy infrastructure sent oil prices soaring. Brent crude futures, the global oil benchmark, settled around $107 a barrel, but sort above $111 a barrel in after hours trading. Today, in an effort to curb rising energy prices, President Trump issued a 60 day waiver of the Jones Act.

5:07The law has been around for a century, and it requires that ships moving goods between US ports sail under a US flag and have a crew of sailors that are US citizens. I'm joined now by Costa's Paris, who covers shipping for the journal to talk about why the president is doing this now. Costa, is it common to see the Jones Act waived when have we seen this in the past? Very, very rarely. The US government granted one after Hurricane Maria, devastated Puerto Rico in 2017, and again, after the island was struck by Hurricane Fiona in 2022. Another waiver was granted 2021 for fuel shipments to these coasts after the colonial pipeline shut down, falling a cyber attack. How would a waiving the act lead to lower oil prices? Can you just like connect those dots for us? Moving oil from US port to US port requires Jones Act ships. Those ships cost to be built about three times as much compared to Asia.

6:09That's the one thing. The second higher cost is manning it with American crews, American sailors, are more expensive, and of course, if you build a ship that's three times more expensive, they do sure it's for the ship itself is expensive. So, waiving it, the transport costs will be cut down substantially. That was WSJ reporter, Costa's Paris. Thanks, Costa. Thank you guys. And turning to private markets were exclusively reporting that Stone Ridge asset management of fund holding consumer and small business loans is the latest corner of the private credit market to come under stress. The Wall Street Journal saw an investor update the firm put out last week. It said recent redemption requests were so high that it would only honor 11% of the amount investors wanted back. Lots of investors have been wanting to cash out a private credit in recent weeks. And fund managers have had to grapple with whether to relax their existing redemption limits.

7:09Many of those funds held loans to software makers or other corporate sectors that investors fear will be displaced by advances in artificial intelligence. Coming up, we've got the latest on the conflict in the Middle East, and President Trump's pick to lead the Department of Homeland Security fits for a confirmation hearing. That's after the break. Voices are powerful things. At Vanguard, investors are also owners and their voices are heard. And now with investor choice, they have an even greater voice when investing. It's just another reason millions of investors have turned to Vanguard for 50 years. 50 million investors, 50 million voices. Vanguard. Vanguard is owned by its funds, but are owned by Vanguard's fund shareholder clients to learn more, visit vanguard.com. All investing is subject to risk. Vanguard Market Incorporation Distributor figure as of January 2025. In the Middle East, Israel says it's killed Iranian intelligence minister Esmil Katib,

8:12the latest member of Tehran's top leadership it has killed this week. Israel said Katib played a significant role during the Tehran regime's crackdown on recent protests and said it had planned to hunt down all of Iran's leadership. Iran confirmed Katib's killing with its president saying he was heartbroken by the death. Separately, earlier today, Israel struck Iran's massive south-pars gas field, which Tehran shares with Qatar. An American official said the US was aware of the operation. Later, a ballistic missile fired by Iran hit a major liquefied natural gas hub in Qatar, causing extensive damage. In response to the Israeli strike, Iran said it considered refineries, petrochemical facilities, and gas fields to be, quote, legitimate and prime targets. Oil officials in Qatar, Saudi Arabia, and the United Arab Emirates evacuated oil infrastructure. Meanwhile, Saudi Arabia said that it intercepted and destroyed four ballistic missiles fired toward its capital, Riyadh, with debris falling in parts of the city. No initial damage or injuries were reported.

9:13And we told you last week that the Pentagon is moving additional Marines and warships to the Middle East. Those forces, the 31st Marine Expeditionary Unit, a rapid response force of about 2,200 Marines, are expected to arrive next week. One of the ways the US could use those forces is to reopen the street of Hormuz, that critical pathway for the world's oil that Iran has effectively closed. I'm joined now by Laura Seligman, who covers national security for the journal. Laura, what is the Marine Expeditionary Unit, and how could the US use it in the Middle East? This unit is typically used for raids or special operations that they call the Marine or the Swiss Army knife of the US military. They can basically do anything. Based on my conversations with current and former US officials, it seems likely that the US Marines that are being sent to the Middle East could be deployed to see some of the islands off of the southern coast of Iran, which Iran is using to threaten commercial traffic in the street.

10:14Carg Island is the most strategic one economically. It's host to about 90% of Iran's oil exports. So if the Marines sees this island, then they could potentially use that as a bargaining chip to get Iran to open the street. There's multiple other islands that are actually in the street itself. Kesham Island, right at the mouth, if you will, of the street. That's host to a bunch of Iranian missile facilities and Iranian naval facilities as well. Seasoning an island like that could allow the US military the high ground and the ability to use that position to then counter Iranian fastboats and missiles. And then there's Keysh Island and Ormuz Island as well, which are much smaller, but also very strategically located. Boots on the ground is a red line for a lot of Americans, including many Republicans who have supported President Trump in this conflict, does deploying this unit mean that that's happening or could happen?

11:14And what would that mean for the president? Well, I think this is an interesting method to offer a bit of a loophole for that because these islands, some of them are actually disputed by the Emirates and they're, of course, islands, they're not Iran proper. So it does give the president a little bit of leeway to say, hey, we haven't actually put American Boots on the ground, which is something that he's long promised to avoid. We're just putting the American Boots on and some of these rocky islands off the coast of Iran. You could argue that this allows him to argue he has not broken his campaign promise. That was Wall Street Journal reporter, Laura Seligman. Thanks, Laura. Thanks for having me. President Trump's pick to lead the department of Homeland Security, Republican Senator Mark Wayne Mullin faced lawmakers during his confirmation hearing today. The Oklahoma Senators said he would take a lower profile approach to the job than Kristi Nome, while backing Trump's immigration crackdown. My goal in six months is that we're not

12:14in the lead story every single day. My goal is for people to understand we're out there, we're protecting them. And that's what's new for this Wednesday afternoon. Today's show was produced by PR Vienna May with supervising producer Tally Arbel. I'm Alex O'Solev for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening. Voices are powerful things. At Vanguard, investors are also owners and their voices are heard. And now with investor choice, they have an even greater voice when investing. It's just another reason millions of investors have turned to Vanguard for 50 years. 50 million investors, 50 million voices. Vanguard. Vanguard is owned by its funds, but are owned by Vanguard's fund shareholder clients to learn more visit Vanguard.com. All investing is subject to risk. Vanguard Market Incorporation Distributor figure as of January 2025.