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The economy in January showed indications of cooling, the Conference Board said, while noting that the flare-up of war in Iran prompted it to downgrade its 2026 growth forecast by 0.1 percentage point to 2%.

Red flags signaling slowing growth in the future — including a slump in consumer expectations, falling building permits for private housing and declining new orders by manufacturers — dimmed the economic outlook, the Conference Board said Thursday in a report on its Leading Economic Index, which tracks 10 economic data points to predict turning points in the business cycle.

“While the top-line LEI continues to signal headwinds to economic activity, the strengths among its components on the six-month basis were widespread for three straight months (Nov. 2025 to Jan. 2026), with seven out of 10 components advancing,” Justyna Zabinska-La Monica, the Conference Board’s senior manager for business cycle indicators, said in a statement. Data collection concluded before the Iran conflict, she said.

Federal Reserve officials on Wednesday raised their forecast for economic growth this year to 2.4% from 2.3% in December while holding the main interest rate steady and noting the uncertain impact on the economy from the Iran war.

Fed Chair Jerome Powell said at a post-meeting news conference that it is too early to predict whether fighting in Iran will lead to a sustained surge in the price of oil, spurring inflation in the U.S., crimping consumer spending and slowing economic growth.

Since hostilities began on Feb. 28, Iran has severely limited shipments of oil and other energy commodities through the Strait of Hormuz.

Futures for Brent crude oil, the global benchmark, have rocketed by about 55%, from $73 per barrel to $112 per barrel.

Also, the average price for a gallon of regular gasoline has surged during the past month by 33%, according to AAA.

“This is looking like it’s going to be a protracted conflict, and oil prices are going to stay high for a longer time,” Fed Governor Christopher Waller said Friday.

“So that suggested inflation was more of a concern than I was putting it,” he said in an interview on CNBC. He voted on Wednesday for holding the main interest rate at a range between 3.5% and 3.75%.

Waller in January dissented against a Fed decision to leave the benchmark rate unchanged, saying weakness in the labor market called for trimming borrowing costs.

A sustained rise in oil prices threatens to spur price pressures throughout the economy, Waller said.

“Oil is a major intermediate import, and it will at some point bleed through [the economy], and that's where you worry about high and persistent oil shocks,” he said.

Fed Vice Chair Michelle Bowman, who also voted on Wednesday for no change to borrowing costs, forecast on Friday that the central bank will trim the federal funds rate by 0.25 percentage points three times this year.

Fed officials expect to make just one quarter-point reduction in the benchmark interest rate, based on a median projection released on Wednesday.

“It's too soon to tell what the impacts of Iran and the conflict may be,” Bowman said in an interview on Fox Business Network, voicing optimism about economic growth.

“But I do expect that we'll start to see some of the supply side policies working their way through the economy, as well as the 75 basis points of cuts that we put in place last year,” she said.