EconoFACTS

March 18, 2026 | 15:14

FOMC Announcement and SEP — Another Pause for Powell

Economist

Deputy Chief Economist and Managing Director
Economics

Michael is part of the team responsible for forecasting and analyzing the North American economy and financial m... (Read more)

Michael Gregory , CFA

Deputy Chief Economist and Managing Director
Economics

Michael is part of the team responsible for forecasting and analyzing the North American economy and financial m... (Read more)

The FOMC kept policy rates unchanged today, with the target range for the fed funds rate at 3.50%-to-3.75%. This was the second consecutive pause (after 75 bps of rate cuts during last year’s final three confabs), and it is not likely going to be the last.

In the statement, two things stood out. First, a new phrase was inserted: “The implications of developments in the Middle East for the U.S. economy are uncertain.” Not only are they “uncertain” but such stagflationary shocks are a central banker’s worst nightmare (it is easier to deal with either upside inflation risks or downside growth risks… but not both). Second, only Governor Miran dissented in favour of a rate cut (which he regularly does). Governor Waller, who sided with Miran before, shifted back to the hold camp.

In Summary of Economic Projections (SEP) and the ‘dot plot’, the median forecast remained at a single quarter-point cut by the end of this year and next year. Interestingly, while the median profile was unaltered, the mean projection moved up by 2½ bps to 5½ bps, so there is a hint more hawkishness out there.

Elsewhere, while the median calls for total and core inflation were lifted as expected, by 0.2-to-0.3 ppts for this year (to both 2.7% y/y), and by 0.1 ppts (to both 2.2% y/y), real GDP growth was raised as well (by as much as 0.3 ppts to 2.3% for next year). Indeed, the longer-run level was lifted by 2/10s to 2.0%, as more Fed folks are believing that recent strong capex, particularly related to AI and automation, will pay off.

In the Q&A, Powell indicated that the Fed could be more concerned about current inflation risks posed by spiking oil prices because of the past five years’ worth of missed inflation targets. He also talked about still having to wait to see the ultimate impact of tariffs on inflation, too. These were given as the rationalization for maintaining policy rates at a “mildly restrictive” stance. This sounds like the current policy pause could last a while longer.