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Wednesday, March 19, 2025
Later today, after market trajectories have been active for hours, we’ll see the latest monetary policy statement from the Federal Open Market Committee (FOMC), which is almost 100% certain to render an unchanged verdict to the +4.25-4.50% Fed funds rate that has been with us since mid-December of last year.
Following the statement — which will include a new "dot-plot" to map out where the Fed sees future moves — Fed Chair Jerome Powell will give his customary press conference to enhance the statement presented by the Fed. In a general sense, Powell’s tenure (he’s currently serving the third year of his second four-year term) has continued to be relatively open and non-opaque in his methods and thought processes, even if his statements do roil markets every so often.
Powell’s Fed peaked interest rates at +5.25-5.50% from September 2023 for a full year. The last time the Fed funds rate was that high was for a couple months in early 2001, shortly after the Supreme Court decided the Bush v. Gore presidential election. Yet when Powell & Co. slashed rates to 0.00-0.25% in March 2020 as the Covid epidemic charged through the world, it was the second cut to zero, after Fed Chair Ben Bernanke made the move in December 2008 amid the financial collapse stemming from bank deregulation and mortgage-asset fraud.
In short, it’s been an eventful first quarter of the 21st century for the U.S. — indeed, for the world. And, with new big policy shifts from the second Trump administration — from DOGE government job cuts to tariffs levied at our biggest trading partners — the eventfulness looks to continue. Thus, what the Fed and Powell have to say about the state of the economy today should have plenty of fresh material, and will be parsed finely.
Keep in mind nearly all economic and labor-oriented reports have been relatively well-behaved over the past several months. We’ve seen some inflation creep off the bottom (only a few metrics ever got as low as +2%, and never for very long) and employment levels have remained strong despite some radical moves made in recent weeks. We also know these economic reports are mostly backward-looking, so we may be experiencing some erosion in the Fed’s key metrics without yet seeing it. How far into speculating about our near-future economy will the Fed and Powell be willing to go? We look forward to finding out.
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