SNAP ANALYSIS: FOMC statement little changed, adds a line regarding the uncertainty in Middle East

STATEMENT: The FOMC maintained rates at between 3.50-3.75%, with no change to the forward-guidance sentence on considering “the extent and timing of additional adjustments” or to the commitment to maximum employment and 2% inflation. The voting dissent saw only Miran call for lower rates (some had expected him to be joined by Waller again, and others were suggesting that Bowmn could also join the dissenters in calling for a rate cut). The March statement leaves the economic assessment broadly unchanged, except that “the unemployment rate has shown some signs of stabilisation” is replaced with “the unemployment rate has been little changed in recent months”; but “economic activity has been expanding at a solid pace”, “job gains have remained low”, and “inflation remains somewhat elevated” are unchanged. In its risk assessment, January’s “uncertainty about the economic outlook remains elevated” is retained, but March adds that “the implications of developments in the Middle East for the US economy are uncertain.” Balance-sheet and implementation guidance were also unchanged.
SEP: The Fed raised its growth view in the near-term and over the medium-term, lifted its inflation forecasts, and only modestly softened its labour-market view. GDP was revised up to 2.4% (prev. 2.3%) for 2026, 2.3% (prev. 2.0%) for 2027 and 2.1% (prev. 1.9%) for 2028. Long-term growth was revised up to 2.0% from 1.8%. PCE and core PCE were both revised higher, with the biggest change in 2026, where both now sit at 2.7% (prev. 2.4% and 2.5%, respectively). The unemployment view was unchanged for 2026 at 4.4% (prev. 4.4%), but nudged up to 4.3% in 2027 (prev. 4.2%). The median rates path was unchanged through 2028, though the longer-run fed funds rate ticked up to 3.1% (prev. 3.0%).
POWELL PRESSER: The market reaction to the policy announcement was muted; at Chair Powell's press conference, traders will look to whether he frames the actions as a genuine pause or a bias to stay on hold for longer; traders will be looking at whether he downplays weak jobs data as noise, whether he treats war-related price pressure as temporary or potentially persistent (the Fed has previously said it is able to look through one-time price adjustments), and whether he validates the market’s shallower cut path by stressing inflation/risk management over labour-market insurance.
WATCH: Powell Press conference here