Hailey Whitlock, Editor

The Federal Reserve serves a crucial role in the monetary policy of the United States, heavily influencing interest rates and by extension inflation and unemployment. At each of the eight Federal Open Market Committee meetings per year, board members vote on the level of the federal funds rate. The federal funds rate is essentially the interest rate paid when borrowing from the Federal Reserve or other banks. While at first glance this may not seem essential to the average consumer, it certainly is. The reason behind this is that the rate required for banks to borrow heavily impacts the rate banks are willing to lend at to the average consumer whether for a mortgage, car loan or even student loans. When the interest rates are lower, banks are more likely to lend aggressively, borrowing from other banks if they fall below the reserve requirements (the amount banks must keep on hand). However, when rates are high banks are more conservative as they do not wish to pay the steep interest rates if they overspend. 

The Federal Reserve has two key goals: minimize unemployment and keep inflation to about 2%. Yet, each of these goals is often opposite the other; increasing rates typically curbs inflation while increasing unemployment and cutting rates attempts to reduce unemployment but can allow inflation to grow. As of late, unemployment has been quite high, and rates have been cut three times in 2025 in an effort to address the high unemployment rate. However, current geopolitical tensions in Iran have shifted the Fed’s attention in a different direction; instead of placing the bulk of the focus on unemployment, the Fed has been forced to look at the possibility of heightened inflation due to high oil prices. 

As such, the two goals are opposite. Should they decrease interest rates to further increase employment? Increase interest rates to get ahead of inflation rumors? Or keep interest rates constant in the hope of exacerbating neither? With the next meeting of the Federal Reserve set to conclude on Mar. 18, 2026 per CNN experts expect the Federal Reserve to take the latter approach, keeping interest rates stable in light of the current political situation. Perhaps even more importantly, quarterly projections will be released with an analyst from AP News  indicating the probability that rate cuts for this year will shift from one cut to zero, indicating that the unemployment issue may continue to linger. 

It is always an incredibly difficult task when unemployment and inflation are high in tandem, but the current war in Iran only further highlights existing problems. Inflation was already high, with data from AP News indicating inflation excluding food and energy (a necessary exclusion as gas is in the energy sector) was 3.1% in January compared to a year earlier, in line with the rates from two years ago indicating an elevated inflation rate. The unemployment levels aren’t any better; in February AP News reports businesses cutting 92,000 jobs. While bad in and of itself, heightened oil prices certainly don’t help at the moment. 

As oil prices continue to climb, consumers have less disposable income, meaning they have fewer funds to spend on other items. This means that many industries may suffer, potentially laying off more workers. In addition, geopolitical tensions often encourage consumers to save more when possible, worried about stability long-term. When consumers are spending less (or spending more on one good, such as oil), unemployment tends to rise.

Overall, the current oil crisis will continue to impact the Federal Reserve as economists seek to battle rising inflation and unemployment in tandem to stabilize the economy.