U.S. FOMC Meeting (March 2026)

Fed remains on hold and continues to signal just one cut in 2026

• The Federal Open Market Committee (FOMC) held the policy rate steady at the target range of 3.5%-3.75% for a second consecutive meeting. 
• In the post-meeting statement, the Fed gave a nod to the increased uncertainty surrounding the outlook due to the ongoing conflict in the Middle East. They also tweaked the language on the unemployment rate, now noting that it has "been little changed in recent months" from its prior wording of "shown signs of stabilization". 
• Accompanying the statement, the FOMC also released a revised set of economic forecasts, known as the "Summary of Economic Projections" (SEP). The SEP represents the median of the individual forecasts submitted by each of the FOMC participants. Relative to the December update:
  • The median projection for real GDP growth – as measured on Q4/Q4 basis – was upgraded to 2.4% (previously 2.3%) in 2026, and 2.3% (previously 2.0%) in 2027. The long-term outlook was also revised higher to 2.0% (from 1.8%). 
  • The median year-end unemployment forecast for 2026 was unchanged at 4.4%, while 2027 was nudged higher to 4.3% (previously 4.2%).
  • Core PCE inflation – the Fed's preferred inflation gauge – was revised higher to 2.7% for 2026 (previously 2.5%) and 2.2% in 2027 (previously 2.1%).
  • Lastly, the median projection for the federal funds rate was kept unchanged and suggest just one additional quarter-point cut in both 2026 and 2027. However, 14 participants now see one or no cuts this year versus eleven in the December 2025 projection. 
• Eleven of the twelve FOMC members voted in favor of today's decision. Only Stephen Miran dissented in favor of a 25-bps cut.

Key Implications

• No surprises from the FOMC today. The decision to maintain its policy rate was widely expected by market participants, even before the onset of the Middle East conflict. However, the spike in oil prices and accompanying financial market volatility has added a fresh dose of uncertainty for policymakers, arguing for an even more cautious approach in the months ahead. 
• Looking past the geopolitical tensions, the economy remains in a decent spot, which is ultimately what's allowing the Fed to sit tight. Provided the conflict in the Middle East is short lived, the drag on growth and hit to inflation is likely to be relatively small (see forecast). But a more prolonged conflict that leads to higher oil prices and a more meaningful tightening in financial conditions raises the odds of a stagflationary type outcome (i.e., low growth, higher inflation). There's no way of knowing how this will play out, but by maintaining maximum flexibility, the Fed stands well positioned to respond to the dual-sided risks. 

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