Fed’s Key Decision Ahead, Market Braces for Impact Amid Inflation & Political Uncertainty

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The Federal Reserve’s next big decision is just around the corner. On March 19, the FOMC will announce its latest policy move, and all eyes are on whether it will hold interest rates steady. According to the CME FedWatch Tool, there is a 99% probability that the Federal Reserve will keep interest rates unchanged.

This decision is crucial as policymakers need to  balance slowing growth with the ongoing threat of inflation. They also need to consider how to address uncertainties, especially around political events, such as the potential impact of ‘Trump uncertainty,’ as political instability or actions surrounding President Trump could affect the economy.

The stock market has dropped to a six-month low as concerns about slowing economic growth and the impact of tariffs have shaken investor confidence. Monday’s release of February retail sales will start off the week’s economic reports.

Fed To Keep Rates Unchanged?

The recent stock market sell-off has raised concerns about slowing economic data, leading investors to expect about three interest rate cuts from the Fed in 2025. However, with inflation still above the Fed’s 2% target and potential impacts from tariffs and other policies pushing prices higher, the Fed is widely expected to keep rates unchanged on Wednesday.

The main focus will be the Fed’s latest Summary of Economic Projections (SEP), which includes the “dot plot” showing where policymakers think interest rates will go. Investors will also pay close attention to comments from Fed Chair Jerome Powell during his press conference. 

Fed To Stress Patience

When the Fed last updated its dot plot in December, it predicted that the fed funds rate would end 2025 between 3.75% and 4%, which suggests two 25-basis-point cuts this year, one less than what the market expects.

Michael Gapen, chief US economist at Morgan Stanley, expects the Fed to emphasize “patience” due to ongoing fiscal uncertainty. He thinks Chair Powell will be cautiously optimistic about the economy but will point out the uncertain outlook because of high policy uncertainty.