Federal Reserve Policy Meeting Update – March

Uncertainty continues to cast a shadow over the U.S. economy. While growth remains positive, concerns are rising as Q1 GDP projections fall short of expectations. Markets remain on edge, pressured by tariffs and fluctuating economic conditions. The Fed’s primary challenge is inflation, which remains above target and is expected to stay elevated throughout the year—unless a recession occurs—due to the potential introduction of new tariffs under the current administration’s trade policies.

Heightening these concerns, a recent University of Michigan survey indicates that consumer sentiment toward inflation expectations is rising, implying that consumers are increasingly willing to tolerate higher prices for an extended period—contributing to persistent inflation. Anchoring inflation expectations remains crucial, and the Fed may see a phase of below-trend growth or even a mild recession as an acceptable trade-off to curb inflation.

As widely expected, the Federal Reserve held interest rates steady at its recent March meeting. What set this meeting apart was the release of the Summary of Economic Projections (SEP). This quarterly update aggregates forecasts from the 19 FOMC participants on key economic indicators, including the policy rate, GDP growth, inflation, and unemployment. The SEP includes the dot plot, which visualizes where each policymaker expects interest rates to be in the coming years. The median projection serves as the headline forecast.

The current federal funds rate midpoint remains at 4.375%, with the latest projections unchanged from December’s SEP. While nine of the 19 members anticipate two rate cuts, bringing the rate down to 3.875% by year-end 2025, a growing number of officials are adopting a more hawkish stance. Four members now predict no cuts this year—up from just one in December—while another four expect only a single cut. Meanwhile, independent forecasts from Oxford Economics and Capital Economics suggest that if the Fed does lower rates, it may not happen until December.

Colliers Insight
FOMC participants’ assessments of appropriate monetary policy: Midpoint of target range or target level for the federal funds rate
Source: FOMC
Share this with your followers

The Fed’s commentary highlighted increased uncertainty surrounding the economic outlook. The Fed remains cautious, with inflation still above target and economic growth slowing. While two rate cuts are still the official projection, the path forward remains uncertain.

During the post-meeting press conference, Chair Jerome Powell underscored the ongoing uncertainty in the economic outlook, highlighting that officials are evaluating the combined impact of changes in trade, immigration, fiscal, and regulatory policies. In response, Federal Open Market Committee policymakers raised their inflation projections while scaling back their GDP growth estimates.

Inflation

GDP

Unemployment