Federal Reserve expected to hold interest rates amid global uncertainty

(CNN)- As economic tensions rise overseas, all eyes are on the Federal Reserve today as it prepares to announce its latest decision on interest rates. Most analysts expect the Fed to hold rates steady, despite growing concerns about inflation, rising oil prices, and pending tariffs.

“The hard data are showing that the U.S. economy is doing very well and inflation is very contained,” said William Lee, a former Federal Reserve economist.  He also cautioned that global instability could shift the Fed’s outlook. “They are also anxious about what’s happening to inflation… not just tariffs, but also because of potentially the oil spike that could come about if the oil production facilities in Iran were to be disrupted.”

The ongoing conflict between Iran and Israel has driven oil prices sharply higher, with damage reported to key energy infrastructure. Experts warn that regional export facilities could also be targeted.

“If you have any type of attack on a facility in this environment, prices could go significantly higher,” said Helima Croft, head of Middle East and North Africa Research at RBC Capital Markets. “You had real action in the Straits of Hormuz — that’s back to triple digits.”

Adding to the uncertainty is the upcoming expiration of a pause on several “reciprocal” tariffs, set to end July 9. President Donald Trump says nations can avoid new trade penalties by finalizing agreements. He returned from the G-7 Summit with a signed deal with the U.K., but has yet to secure agreements with Japan, the European Union, or Canada.

“We’re watching closely for inflation to hit both markets,” said Matthew Holmes, Executive Vice President of the Canadian Chamber of Commerce.