FOMC Update - Mar 2025
March 19, 2025
As expected, the FOMC did not change its benchmark rate range from 4.25%–4.50%. The Fed’s updated economic projections indicate a 50bp rate cut by the end of 2025, bringing the federal funds rate to 3.88%. The median forecast for PCE inflation increased to 2.8% (from 2.5%), while the core PCE inflation forecast was revised to 1.70% (from 2.1%). The fed has raised its inflation projections and reduced growth projections, increasing concerns about stagflation.Rates and Market:
- Fed Funds Target: 4.25%–4.50%
- Market Reaction: The release was viewed as hawkish. UST 2s are down 7bp to 3.97%, and UST 10s are down by 4bp to 4.25%. Currently, the market is pricing in an 84% likelihood that fed funds target will remain unchanged at the May 7, 2025 FOMC meeting.
The FOMC announced the following actions and analysis:
- FOMC votes (11-1): Christopher J Waller agrees to no change in the target rate but preferred to continue the current pace of decline in security holdings.
- The Fed states “Uncertainty around the economic outlook has increased” as growth slows and inflation remains high.
- Although there’s no mention of tariffs and DOGE, the Fed indicates that it’s ready to “adjust the stance of monetary policy as appropriate if risks emerge”
- The Fed will continue reducing its holdings of Treasury securities, agency debt, and agency MBS.