FOMC Meeting: Key Takeaways

March FOMC meeting | March 19, 2025

The Federal Open Market Committee (FOMC or the Committee) left the federal funds rate unchanged at 4.25% – 4.50%, continuing a pause on the interest-rate-cutting cycle that started in September. The Committee stated that uncertainty around the economic outlook has increased. The Summary of Economic Projections shows a decrease in gross domestic product (GDP) growth expectations while also showing an increase in inflation expectations for 2025. The Federal Reserve (Fed) will slow the pace of decline of its securities holdings beginning in April. It will reduce its holdings of U.S. Treasury securities to just $5 billion per month down from $25 billion currently. The monthly redemption cap on agency mortgage-backed securities will remain unchanged at $35 billion.

• Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.
• In support of its goals, the Committee decided to keep the federal funds rate unchanged at 4.25%-4.50%. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate (price stability and full employment).

• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook.
• The Committee will continue to take into account a wide range of information including readings on labor market conditions, inflation pressures, inflation expectations, and financial and international developments.

• No change in the Federal Funds rate at today’s meeting was expected by markets. The Treasury market was little changed after the release of the announcement.
• The Committee removed the statement that they “judged that the risks to achieving its employment and inflation goals are roughly in balance.” This suggests that the Committee may be more concerned about potential increases in inflation in the future.
• The Summary of Economic Projections (dot plot), show the Committee still expects two rate cuts this year. However, the Committee has become less dovish, as only two members forecast more than two rate cuts this year, down from five members forecasting more than two rate cuts in 2025 at the December meeting. Four members now project no change in the Federal Funds rate this year.
• The Fed decreased its median 2025 forecast for GDP in 2025 from 2.1% at the December projection to 1.7%. The Fed increased its median 2025 core Personal consumption expenditures (PCE) inflation projections from 2.5% in December to 2.8%.

• May 7 | June 18* | July 30 | September 17* | October 29 | December 10*
  

  *Indicates the meeting is associated with a summary of economic projections. In addition, every meeting will be accompanied by a press conference.

Forecasts and targets are based on certain assumptions and on views of market and economic conditions which are subject to change.

All investing involves risks including the possible loss of principal. Investments in fixed-income securities are subject to interest rate, credit/default, liquidity, inflation, and other risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline in the bond’s price. Credit risk is the risk that an issuer will default on payments of interest and principal. This risk is higher when investing in high yield bonds, also known as junk bonds, which have lower ratings and are subject to greater volatility. If sold prior to maturity, fixed income securities are subject to market risk. All fixed income investments may be worth less than their original cost upon redemption or maturity.

Gross domestic product (GDP) measures the final market value of all goods and services produced within a country. It is the most frequently used indicator of economic activity. The GDP by industry approach (or output-based GDP) is the sum of the gross value added (output less intermediate consumption) of all industry and services sectors of the economy (at basic prices), plus all taxes less subsidies on products. This concept is adjusted for inflation.

The personal consumption expenditure (PCE) measure is the component statistic for consumption in gross domestic product (GDP). It is essentially a measure of goods and services targeted towards individuals and consumed by individuals.

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