The Federal Reserve, in a widely anticipated move, has kept its benchmark interest rate unchanged within the range of 3.50%–3.75% for the second consecutive meeting. The decision, taken by the Federal Open Market Committee (FOMC) with an 11-1 vote, signals a continued "wait-and-see" approach as the central bank navigates persistent inflation and geopolitical uncertainties.
Market focus has now shifted to the next FOMC meeting scheduled for April 29. According to data from prediction market Polymarket, there is a 94% probability that rates will remain unchanged in April. The likelihood of a 25 basis point cut is priced at just 4%, while a more aggressive 50 basis point cut stands at 1%. The probability of a rate increase remains at 2%.
Attention is currently centered on Fed Chairman Jerome Powell's post-meeting press conference. His remarks are expected to provide critical insights into the Fed's outlook on inflation, employment, and the future path of interest rates. The Fed's updated economic projections show a slight upward revision in growth expectations to 2.4% for 2026, while the forecast for the Personal Consumption Expenditures (PCE) index, a key inflation gauge, was raised to 2.7% for this year.
Despite holding rates steady, the Fed's "dot plot" indicates officials still project interest rate cuts for 2026 and 2027, with the long-term policy rate expected to stabilize around 3.1%. However, significant uncertainties cloud the timing. The Fed's statement specifically highlighted the ongoing US-Iran conflict and risks around the Strait of Hormuz, noting these geopolitical tensions could drive oil prices higher and exert further inflationary pressure, with an "uncertain" impact on the U.S. economy.
The decision comes amid heightened political pressure, with U.S. President Donald Trump recently criticizing Powell for not calling an emergency meeting to cut rates. Adding to the policy uncertainty is the impending end of Powell's term in May and the nomination of former Fed Governor Kevin Warsh as his potential successor.
