By Howard Schneider WASHINGTON, April 8 (Reuters) - A growing group of Federal Reserve policymakers felt last month that interest rate hikes might be needed to counter inflation that continued to exceed the central bank's 2% target,

Policymakers said they would need to remain "nimble" as they weighed the impact the war had on inflation.

Despite the uncertainty over the war in Iran, members of the Fed’s monetary policy committee still hoped for a rate cut later in the year.

Ultimately, the Fed kept its key rate unchanged at its March meeting at about 3.6%. It has stood pat in its first two meetings this year after cutting its rate three times at the end of 2025. Chair Jerome Powell, at a news conference after the meeting, downplayed projections by officials that the Fed could reduce its rate once this year.

Fed's Beth Hammack warns interest rates could rise if inflation stays elevated, citing uncertainty over the Iran war's impact on oil and gas prices.

Investors are reviving bets that the Federal Reserve could cut interest rates this year after the U.S. and Iran agreed to a two-week cease-fire. Investors now see a 43% chance of at least one rate cut by December,

The conflict in the Middle East has left the Federal Reserve braced for higher inflation, with more officials open to the possibility of rate increases.