Fed Hedges on Rate Hike Amid Iran Conflict Uncertainty

The Federal Reserve's two-day meeting started today, and financial markets are left wondering what to expect. The central bank is expected to keep its key interest rate flat, but a hike would not come as a complete surprise either.

Fed officials are weighing whether to raise interest rates to push inflation down to the central bank's goal of a 2% annual rate. However, recent developments in the Iran war and Fed Chair Kevin Warsh's policy of not issuing 'forward guidance' have made the meeting's outcome much less of a foregone conclusion than usual.

As of Monday, traders were pricing in a 31% chance the Federal Open Market Committee would raise the fed funds rate by a quarter-point. The Iran war has taken several twists and turns during the pre-meeting 'blackout period,' leaving Fed-watchers guessing about how FOMC members view recent developments.

The Fed faces a decision whether to raise its benchmark interest rate, which would push up borrowing costs on many kinds of loans. This could help push down inflation, but at the cost of potentially slowing down the economy and hindering the job market.