The Federal Reserve held interest rates at the central bank's March FOMC meeting on Wednesday, with officials indicating they still expect two rate cuts in 2025. Yahoo Finance Senior Reporter Alexandra Canal takes a closer look at the latest dot plot, which shows Fed officials' expectations for rates throughout the year and into 2026, 2027, and beyond.
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The Fed holding interest rates steady for March and releasing also its latest summary of economic projections. For more, we're bringing Yahoo Finance Senior Reporter, Alexandra Canal, on the dot plot. Hi, Ali.
Hi, Julie. Yes, the Summary of Economic Projections is only released once every quarter, so always a lot of anticipation heading into these meetings. But especially this time around, because we've seen a lot of fear over stagflation, markets selling off. But so far, I mean, we're pretty much on par for the projections that we saw back in December. So most FOMC members anticipate two interest rate cuts to come this year. That would bring the Fed funds rate down to 3.9% in 2026. An additional two cuts bringing us down to 3.4%. But I want to zone in on 2025, and really, I want to compare that to what we saw in December, because even though it's the same cut projection, FOMC members are leaning a little bit more hawkish. So you see that in December, just one official thought that we would remain steady, so no cuts to come. But this time around, we saw four officials anticipating no change. Four officials also anticipate just one cut, whereas you saw over here in December, three officials. And then again, we have the majority of members, both here anticipating those two cuts. So let's get to the reason why. A lot of this has to do with the uncertainty that we're seeing from the Trump administration, particularly when it comes to tariffs and the impact that could have on inflation. So to that point, we did see a slight acceleration when it comes to inflation expectations for this year, 2.8%, compared to what we saw in December at 2.5%. But what's interesting is that if we look out over the long term, 2027, we see 2%. That's the Fed's inflation target. That's the same as what we saw in December. And to that point, Fed Chair Powell really said that the base case there is for the tariff impact to be transitory. And that was very encouraging to markets. I also want to get a check on growth expectations, because again, that stagflation narrative that's been really permeating throughout Wall Street. Now, GDP growth, big change to the downside there. Before in December, most officials saw 2.1%. Now we're at 1.7%. We are going to be below trend, below that 2% level that we've been enjoying over the past few quarters, over the long term before settling at 1.8%. But again, very similar to what we saw in December. And then finally, a quick check on the unemployment rate. Slightly hotter, 4.4%. But again, over the long term, same as December, 4.3%. And that's essentially what Powell was saying was that you have lower GDP growth, higher inflation. That essentially cancels itself out. And then with the unemployment rate only a change of about one-tenth. So he basically said the forecast haven't changed that much. Now, of course, the word uncertainty, as Jared was alluding to earlier, that was mentioned quite a few times in the press release. So perhaps we just need to see more data over the coming months, uh more clarity when it comes to Trump's policies for how this will all be impacted. But for now, it seems like things have not changed from the Fed perspective too much, and that's, of course, helping lift stocks. But again, we'll have to wait and see. Julie, Josh.
Ali, thank you.
