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FOMC Expected to Hold Interest Rates on March 19

The Federal Open Market Committee (FOMC) is not expected to change interest rates at its meeting on March 19, 2025. The strong job market and inflation remaining above the 2% target suggest that rate cuts may be delayed until later in 2025.

Fed’s Cautious Stance on Rate Cuts

Minutes from the FOMC’s January meeting indicate that policy rate reductions are expected to happen later than previously assessed. Federal Reserve Chair Jerome Powell reaffirmed this in his February 11 testimony, stating that if inflation does not sustainably decline to 2%, the Fed can maintain its current policy stance for longer.

Recent Economic Data

The latest economic indicators support the FOMC’s decision to hold rates steady:

• The job market remains strong, reducing the need for rate cuts to stimulate employment.
• Inflation remains close to 3%, exceeding the Fed’s 2% target.

Fed Governor Adriana Kugler highlighted the ongoing inflation risks, stating that holding the policy rate steady was appropriate given the reduced employment risks but persistent inflation concerns.

Interest Rate Projections

Current market projections suggest one or two rate cuts in 2025, but not before summer. The CME FedWatch tool implies that the next possible cut may come in June or July.

At the March meeting, the FOMC will release updated projections, which could provide further clarity on their stance.

Impact of Tariffs on Interest Rate Decisions

Trade policies could influence the Fed’s decisions. While the impact of tariffs remains uncertain, the Fed may overlook one-time price increases. However, a broader trade war or widespread price increases from tariffs could prompt a policy response.

What to Expect

The market views a March rate cut as extremely unlikely. However, if inflation cools or the job market weakens, rate cuts could begin by summer.

For now, uncertainty remains high, with the most likely scenario being one or two rate cuts in 2025, starting later in the year.