FED ANALYSIS: Rates on hold, removes forward guidance, adds emphasis on reaching inflation target, hawkish dot plot shift

Overall, the statement and dot plots were hawkish. The Fed kept rates on hold as widely expected but completely changed the FOMC statement, in a unanimous decision. The committee agreed to remove forward guidance completely, while it also updated its descriptions of the economy, adding more factors to the statement:

Inflation

It reiterated inflation remains elevated, but expressed "relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy." (prev. in part reflecting the recent increase in global energy prices). It also explicitly stated the committee will deliver price stability, emphasising its commitment to achieving its price goal. 

Employment

Job gains have kept pace with the workforce, and the unemployment rate has changed little (prev. Job gains have remained low, on average, and the unemployment rate has been little changed in recent months).

Economic Activity

Expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East (prev. economic activity has been expanding at a solid pace). It also added that "Productivity growth and capital investment are strong", a new line. 

Reserves

The statement also explicitly stated the the Committee reaffirmed its policy of maintaining ample reserves in the banking system.  

Dot Plots

The Summary of Economic Projections were hawkish, while one member on the FOMC did not implement forecasts. This was likely Fed Chair Warsh, with many expecting him to avoid updating forecasts, either because he simply has not been at the Fed long enough, or perhaps due to his distaste for forward guidance. 

The median dot plot for 2026 rose to 3.8% from 3.4%, implying one rate hike vs one rate cut seen in March. The 2027 dot was lifted to 3.6%, implying the median see rates on hold through the end of 2027. 2028 at 3.4% (prev. 3.1%), while the longer run rate was maintained at 3.1%. The median projections on inflation were largely revised up, while unemployment was revised down in 2026 marginally. The median view of change in real GDP growth was lowered in 2026. 

The distribution of dots too was notable. Although the median pencils in one rate hike, one member sees three hikes, five see two hikes, and three see one hike, in March, zero members pencilled in rate hikes. Meanwhile, eight members pencilled in rates on hold through 2026 (prev. 7), while only one pencilled in one rate cut (prev. 7).