| Consensus | Consensus Range | Actual | Previous | |
| Change | 0bp | 0bp to 0bp | 0bp | 0bp |
| Federal Funds Rate - Target Range | 3.50 to 3.75% | 3.50 to 3.75% to 3.50 to 3.75% | 3.50 to 3.75% | 3.5 to 3.75% |
Highlights
There is no change in the fed funds target rate range of 3.50 to 3.75 percent at the end of the March 17-18 FOMC meeting. The FOMC statement of March 18 is very little altered from the one issued on January 28. The assessment of employment has shifted from shown some signs of stabilization to been little changed in recent months. This suggests that the majority of the FOMC finds no particular indication that labor market conditions are worsening with economic activity at a solid pace. Inflation continues to be characterized as somewhat elevated.
The main difference is the addition of the assessment of risks to the economic outlooks. The statement added, The implications of development in the Middle East for the U.S. economy are uncertain. A data-dependent FOMC is going to wait on data and developments before determining the next steps in monetary policy.
There is one dissent in the meeting vote which is not unexpected. Governor Stephen Miran preferred to cut the fed funds rate by 25 basis points.
The update to the quarterly summary of economic projections (SEP) must be read within the context of heightened uncertainty in the economic outlook. Since the last update, expectations for GDP growth in 2026 are revised up a tenth to 2.4 percent, are up four-tenths to 2.3 percent for 2027, and up two-tenths to 2.1 percent for 2028. The longer-run forecast is revised up two-tenths to 2.0 percent. This reflects expectations for continued modest growth close to the longer-run forecast. The unemployment rate forecast is unrevised to 4.4 percent for 2026, up a tenth to 4.3 percent in 2027, and unrevised at 4.2 percent in 2028. This points to anticipation of continued labor market health.
The forecasts for the inflation as measure by the PCE deflator are revised up three-tenths to 2.7 percent in 2026, up a tenth to 2.2 percent in 2027, and unrevised at 2.0 percent in 2028. The core PCE deflator is revised up two-tenths to 2.7 percent in 2026, up a tenth to 2.2 percent in 2027, and unrevised at 2.0 percent in 2028. Fed policymakers are anticipating inflation to be a bit higher in 2026 and come down slowly.
The forecast for the mid-point of the fed funds target rate range is unrevised at 3.4 percent in 2026, and 3.1 percent in 2027 and 2028. This suggests a single rate cut of 25 basis points sometime later in 2026 and no change in 2027 and 2028. The SEP shows the longer-run expectation at 3.1 percent, up a tenth from the prior report. Although a small upward revision, this does put less room between the current rate and neutral.
Market Consensus Before Announcement
Forecasters see no action at this meeting as circumstances are too uncertain with the Iran war under way and oil prices spiking.
Definition
The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.
Description
The Fed determines interest rate policy at FOMC meetings. These occur roughly every six weeks and are the single most influential event for the markets. For weeks in advance, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.
The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates. A change in the fed funds rate, the lending rate banks charge each other for the use of overnight funds, translates directly through to all other interest rates from Treasury bonds to mortgage loans. It also changes the dynamics of competition for investor dollars. When bonds yield 5 percent, they will attract more money away from stocks than when they only yield 3 percent.
The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish.
The Fed also began quantitative easing during the past recession and, through direct purchases in the market, steadily increased its holdings of Treasuries and mortgage-back securities before pulling back from the program beginning in late 2017. Along with lowering its bond holdings, the Fed began to gradually raise its federal funds target until mid-2019 when, facing slowing global growth, it began to lower its target.
Frequency
Eight times a year.