The Federal Reserve kept its policy rate unchanged, as expected, and said it will remain in a range of 3.5 % to 3.75 %. The number of votes in favor of a possible rate cut on the Federal Open Market Committee fell to a single vote, half of what it was in January.

The Fed’s outlook has become less optimistic. While early this year it spoke of a “stabilization” of the labor market, the current view is more of a sideways move with no clear improvement. A new concern-anticipated-is the situation in the Middle East. The committee described the potential impact on the U.S. economy as “uncertain” and it is watching the risks closely.

This shift means that the chances of rate cuts have dropped for now, and in the medium term, if inflation were to surge sharply, the Fed could be forced to use the more unpopular tool of rate hikes.