FOMC Keeps Rates Unchanged Mid Global Uncertainties

The FOMC left the federal funds rate unchanged at 3.50%-3.75% (11-1 vote) on March 18, as anticipated by the markets. The decision passed with most members in favor. Only Stephen Miran voted to lower the target range by 25 basis points.

The FOMC statement noted solid economic activity, somewhat elevated inflation, and uncertainties stemming from tariffs and conflict in the Middle East.

What were the key elements from the FOMC statement supporting the decision?

• Economic activity continues to expand at a solid pace.
• Inflation remains above the Fed's 2% target, both CPI and PCE.
• Job gains have been low, with the unemployment rate little changed recently. Inflation remains somewhat elevated.
• Uncertainty about the economic outlook is elevated, particularly due to developments in the Middle East (we recently covered the potential effects of oil shock and gasoline prices on consumer inflation)
• The Committee remains attentive to risks on both sides of its dual mandate (maximum employment and 2% inflation over the longer run).

In the press conference, Chair Powell stated that inflation progress has been slower than hoped. As usual, he reiterated a data-dependent approach amid balanced risks to the employment and price-stability mandates, albeit the Fed continues to use outdated BLS CPI and BEA PCE data to inform its policies.

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