FOMC Preview: No Change to Fed Funds Rate

Most analysts expect no change to FOMC policy at the meeting this week, keeping the target range at 4 1/4 to 4 1/2 percent. Market participants currently expect the FOMC to be on hold at the March and May meetings, with the next rate cut in June, and another cut later in the year.From BofA: The March FOMC meeting will likely be all about policy uncertainty. The Fed will almost certainly stay on hold, emphasizing patience over panic. QT will likely be paused. Markets could interpret the Fed’s message as hawkish because they are focused on downside risks to activity. But in our view, the “Powell put” is not forthcoming. The SEP forecasts and distribution of risks are both likely to reflect stagflation: weaker growth and higher inflation. The dot plot should still show two cuts in ’25 and ’26. emphasis addedProjections will be released at this meeting. For review, here are the December projections. Since the last projections were released, economic growth was at expectations, the unemployment rate was close to expectations, and inflation was at expectations. However, most forecasters are revising down 2025 GDP growth projections and revising up 2025 inflation projections. The BEA's second estimate for Q4 GDP showed real growth at 2.3% annualized. That put real growth in 2024, Q4 over Q4, at 2.5% - at the top end of the December FOMC projections. It appears growth will slow in Q1 2025, and it seems likely 2025 GDP will be revised down. GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1 Projection Date2024202520262027 Dec 20242.4 to 2.51.8 to 2.21.9 to 2.11.8 to 2.0 Sept 20241.9 to 2.11.8 to 2.21.9 to 2.31.8 to 2.1 1 Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated. The unemployment rate was at 4.1% in February. Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2 Projection Date2024202520262027 Dec 20244.24.2 to 4.54.1 to 4.44.0 to 4.4Sept 20244.3 to 4.44.2 to 4.54.0 to 4.44.0 to 4.4 2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. As of January 2025, PCE inflation increased 2.5 percent year-over-year (YoY). The projections for Q4 2025 PCE inflation might be revised up. Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1 Projection Date2024202520262027 Dec 20242.4 to 2.52.3 to 2.62.0-2.22.0Sept 20242.2 to 2.42.1 to 2.22.02.0 PCE core inflation increased 2.6 percent YoY in January and is expected to be up 2.7 percent YoY in February. The projections for core PCE inflation Q4 2025 might be revised up. Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1 Projection Date2024202520262027 Dec 20242.8 to 2.92.5 to 2.72.0-2.32.0 Sept 20242.6 to 2.72.1 to 2.32.02.0

Mar 16, 2025 - 18:48

Most analysts expect no change to FOMC policy at the meeting this week, keeping the target range at 4 1/4 to 4 1/2 percent. Market participants currently expect the FOMC to be on hold at the March and May meetings, with the next rate cut in June, and another cut later in the year.

From BofA:

The March FOMC meeting will likely be all about policy uncertainty. The Fed will almost certainly stay on hold, emphasizing patience over panic. QT will likely be paused. Markets could interpret the Fed’s message as hawkish because they are focused on downside risks to activity. But in our view, the “Powell put” is not forthcoming. The SEP forecasts and distribution of risks are both likely to reflect stagflation: weaker growth and higher inflation. The dot plot should still show two cuts in ’25 and ’26.
emphasis added

Projections will be released at this meeting. For review, here are the December projections.

Since the last projections were released, economic growth was at expectations, the unemployment rate was close to expectations, and inflation was at expectations. However, most forecasters are revising down 2025 GDP growth projections and revising up 2025 inflation projections.

The BEA's second estimate for Q4 GDP showed real growth at 2.3% annualized. That put real growth in 2024, Q4 over Q4, at 2.5% - at the top end of the December FOMC projections. It appears growth will slow in Q1 2025, and it seems likely 2025 GDP will be revised down.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP¹
Projection Date	2024	2025	2026	2027
Dec 2024	2.4 to 2.5	1.8 to 2.2	1.9 to 2.1	1.8 to 2.0
Sept 2024	1.9 to 2.1	1.8 to 2.2	1.9 to 2.3	1.8 to 2.1

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 4.1% in February.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate²
Projection Date	2024	2025	2026	2027
Dec 2024	4.2	4.2 to 4.5	4.1 to 4.4	4.0 to 4.4
Sept 2024	4.3 to 4.4	4.2 to 4.5	4.0 to 4.4	4.0 to 4.4

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of January 2025, PCE inflation increased 2.5 percent year-over-year (YoY). The projections for Q4 2025 PCE inflation might be revised up.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation¹
Projection Date	2024	2025	2026	2027
Dec 2024	2.4 to 2.5	2.3 to 2.6	2.0-2.2	2.0
Sept 2024	2.2 to 2.4	2.1 to 2.2	2.0	2.0

PCE core inflation increased 2.6 percent YoY in January and is expected to be up 2.7 percent YoY in February. The projections for core PCE inflation Q4 2025 might be revised up.