The US Federal Reserve made no change to interest rates during its most recent meeting (18 March), maintaining rates at 3.5% to 3.75%.

Of the 12 members of the Federal Reserve committee, 11 voted in favour of keeping the rates the same. Just one member, Stephen Miran, voted in favour of a 25-basis point cut.

The committee said that while economic activity has been expanding at a solid pace, job gains have remained low and inflation is still somewhat elevated, with developments in the Middle East injecting further uncertainty.

Lindsay James, investment strategist at Quilter, noted that despite the combination of softer growth and a weakening labour market, which would usually tilt towards a rate cut, the oil price has been a “fly in the ointment”.

While central banks can usually look through volatility, the closure of the Strait of Hormuz and the price shock from events in the Middle East have forced the committee to take a more cautious tone, James said.

Max Stainton, senior global macro strategist at Fidelity International, noted this decision was broadly expected.

“In the press conference, Chair Powell attempted to provide a measured and calm set of forward guidance, emphasising the need not to overreact to current events, noting ‘it’s too soon to know how these will affect the data’, and emphasising exceptionally high uncertainty.”

If oil prices remain around $90-$110 per barrel, the Fed will stay on hold for longer, but it should not lead to a renewed tightening cycle, the Fidelity strategist said. In this environment, one or two rate cuts this year are expected, he added.

See also: Iran war escalation prompts investor ‘panic’ as oil surges past $100 and FTSE plunges

However, if oil rises to more than $120 per barrel, it could create a “materially more difficult policy backdrop”.

Daniele Antonucci, chief investment officer at Quintet Private Bank, added: “We don’t expect any further rate reduction under Fed Chair Powell.”

Until the markets have more clarity on the Iran conflict, the central bank will likely hold on to the next few monetary policy meetings, he said.

See also: The hawk-turned-dove: Trump nominates Warsh as Fed chair