Event
The U.S. Federal Open Market Committee (FOMC) concluded its 17–18 March 2026 meeting
by keeping the policy rate unchanged at 3.50%–3.75%. The Fed assessed the current stance
as appropriate to support progress toward its dual mandate, while emphasising a datadependent approach amid elevated uncertainty.
Key points to note:
1. Broad consensus maintained despite single dissent
The FOMC voted 11–1 to keep rates unchanged, with Governor Stephen Miran in favour
of 25 bps cut. The outcome reflects stability in the Fed’s policy stance.
2. Inflation risks remain skewed to the upside
Powell noted “job gains have remained low”, “the unemployment rate has been little
changed in recent months,” and “inflation remains somewhat elevated”. He also
highlighted uncertainty surrounding Middle East developments, noting that higher
energy prices could lift inflation in the near term. However, he emphasised that it is too
soon to assess the scope and duration of these effects, and that the Fed is not yet in a
position to look through such price pressures.
3. SEP signals sticky inflation and resilient growth
Inflation remains above target, with the Fed projecting PCE and core PCE at 2.7% in
2026 (vs. 2.4% / 2.5% previously), indicating a slower moderation in inflation,
particularly in goods prices affected by tariffs. At the same time, the labour market
remains stable, with unemployment expected to hold around 4.4%. Notably, growth
expectations have been revised higher, with GDP projected at 2.4% in 2026 (vs. 2.3%),
reinforcing the view that the economy remains resilient. The Committee projects the
policy rate at 3.4% in 2026 and 3.1% over the longer run, implying one rate cut in 2026.
4. Powell to remain in role pending investigation
Powell reaffirmed that he has no intention of stepping down from the Board until the
ongoing Department of Justice investigation is fully resolved. He also signalled
openness to remaining as a Governor through 2028 and may serve as Chair pro tempore
if a successor is not confirmed in time.
Outlook:
We expect the Fed to remain on hold in the near term, with the first rate cut likely later in
2026. Elevated uncertainty about oil prices, alongside upward revisions to inflation
projections, suggests that the bar for rate cuts has risen. With inflation still above target,
growth holding firm, and labour conditions stable, there is no urgency to ease policy at this
stage. Powell also emphasised that no policy option is off the table, reinforcing that the path
of rates will remain data-dependent
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