As expected, the Federal Reserve (Fed) held rates steady. In light of the uncertainty created by the US administration, the Fed reiterated that they remain ‘data dependent’.
The numbers.
- The dot plot was unchanged from December, with two cuts forecast in 2025 and 2026 and one in 2027.
- The forecast for core PCE inflation (the Fed’s preferred inflation gauge) rose from 2.5% to 2.8% in 2025.
- 2025 GDP forecast dropped from 2.1% to 1.7%
The Implications.
With both sides of the Fed’s mandate moving in opposite directions (inflation and employment), we feel that most FOMC members opted to stick with their December forecast.
Thus, it is difficult to parse any information from today’s announcement other than the Fed is highly data dependent. What remains to be seen is whether inflation or unemployment pulls them out of their inertia.
With two rate cuts still on the table for later this year, rates are a few bps lower.
