Fed's Powell: We are not going to be in any hurry to move on rate cuts

Federal Reserve Chairman Jerome Powell explained the decision to leave the policy rate unchanged at the range of 4.25%-4.50% after the March meeting and responded to questions in the post-meeting press conference.

Follow our live coverage of the Fed monetary policy announcements and the market reaction.

 

Highlights of the Fed's press conference

Economy is strong. 

Labor market conditions solid. 

Inflation remains somewhat elevated. 

Fed made technical decision to slow pace of decline in balance sheet. 

Recent indications point to moderation in consumer spending. 

Surveys show heightened uncertainty. 

Remains to be seen how uncertainty will affect outlook. 

Unemployment rate in narrow range for last year. 

Labor market conditions broadly in balance. 

Labor market not a source of inflationary pressures. 

PCE prices likely rose 2.5% in December. 

Core PCE prices probably rose 2.8%. 

Inflation expectations have recently moved up, with tariffs as driving factor. 

Longer-term inflation expectations consistent with 2% goal. 

New administration is implementing significant policy changes, net effect is what will matter. 

Uncertainty around policy changes and economic effect is high. 

Focused on separating signal from noise. 

We do not need to be in a hurry. 

We will await further clarity. 

Do not need to be in a hurry, well positioned to wait for better clarity. 

Uncertainty today is unusually elevated. 

Uncertainty is unusually elevated, policy is not on a preset course. 

If economy remains strong, we can maintain policy restraint for longer. 

If labor market weakens, we can ease if needed. 

Have seen some signs of increased tightness in money markets.

Base case is that there is no policy signal from tariffs, but can't know that.

Too soon to say it it will be appropriate to look through effect of tariff inflation.

Goods inflation moved up, trying to track that back to tariff increasing is challenging.

Overall labour market is in balance.

Policy can move in the direction we need to.

We were getting closer to price stability.

If an inflationary impulse will go away on its own, it's not the right thing to tighten policy.

For now, hard data is solid; it's a good time to wait for further clarity before adjusting policy.

We will know in a couple of months if higher goods inflation in first two months of the year was from tariffs.

Housing services inflation has been behaving well, moving down in a good way.

Drop in sentiment is partly to do with big changes by administration on policy.

Some of flatlinning in Fed projections for core inflation this year is from tariffs.

Tariffs tend to bring growth down and inflation up.

We are not going to be in any hurry to move on rate cuts.

Policymakers widely raised their estimates of the risks to Fed goals.

I don't see a reason to think we are looking at a replay of the 70s.

This section below was published at 18:00 GMT to cover the Federal Reserve's policy decisions and the immediate market reaction.

The United States (US) Federal Reserve (Fed) announced on Wednesday that it left the policy rate, federal funds rate, unchanged at the range of 4.25%-4.5% following the March meeting. This decision came in line with the market expectation. 

In the policy statement, the Fed noted that the economy continues to expand at a solid pace and reiterated that inflation remains "somewhat elevated."

Key takeaways from Fed policy statement

"Unemployment rate has stabilized at low level and labor market conditions remain solid."

"Committee is attentive to risks to both sides of its dual mandate, statement no longer says risks are roughly balanced."

"Monthly treasury redemption cap will decline to $5 billion from $25 billion; monthly redemption cap on mortgage-backed securities is unchanged at $35 billion."

"Fed vote on policy included one dissent from governor Waller, who supported no change on policy rate but preferred no change to balance sheet runoff."

Alongside the policy statement, the Fed also published the revised Summary of Economic Projections (SEP), with key highlights listed below.

"Fed officials' median view of fed funds rate at end-2025 3.9% (prev 3.9%)."

"Fed officials' median view of fed funds rate at end-2026 3.4% (prev 3.4%)."

"Fed officials' median view of fed funds rate at end-2027 3.1% (prev 3.1%)."

"Fed officials' median view of fed funds rate in longer run 3.0% (prev 3.0%)."

"Fed projections imply 50 bps of rate cuts in 2025, 50 bps more in 2026."

"Fed projections show 4 of 19 officials see no cuts in 2025, 4 see one cut, 9 see 2 cuts, 2 see 3 cuts."

"Fed projections see economic growth slowing in 2025 and inflation remaining further above 2% target."

"Fed policymakers see end-2025 PCE inflation at 2.7% versus 2.5% in December; core seen at 2.8% versus 2.5%."

"Fed policymakers see 1.7% GDP growth in 2025 versus 2.1% in December, see longer-run growth at 1.8% vs 1.8% in December."

"Fed policymakers see 4.4% unemployment rate at end of 2025 versus 4.3% in December projections."

Market reaction to Fed policy decisions

The US Dollar Index retreated from session highs with the immediate reaction and was last seen rising 0.4% on the day at 103.65.

This section below was published as a preview of the Federal Reserve's monetary policy announcements at 10:00 GMT.

• The Federal Reserve is expected to leave the policy rate unchanged for the second consecutive meeting.
• The revised Summary of Economic Projections could offer key clues about the policy outlook.
• The US Dollar could recover if the Fed downplays growth concerns.  

The United States (US) Federal Reserve (Fed) will announce monetary policy decisions and publish the revised Summary of Economic Projections (SEP), the so-called dot plot, following the March policy meeting on Wednesday. Market participants widely anticipate the US central bank to leave policy settings unchanged for the second consecutive meeting, after cutting the interest rate by 25 basis points (bps) to the 4.25%-4.5% range in December.

The CME FedWatch Tool shows that investors virtually see no chance of a rate cut in March while pricing in about a 30% probability of a 25 bps reduction in May. Hence, revised forecasts and comments from Fed Chairman Jerome Powell could drive the US Dollar’s (USD) valuation rather than the interest rate decision itself. 

In December, the dot plot showed that policymakers were projecting a total of 50 bps reduction in the policy rate in 2025, while forecasting an annual Gross Domestic Product (GDP) growth of 2.1% and seeing an annual Personal Consumption Expenditures (PCE) inflation of 2.5% at year-end. 

“The FOMC is broadly expected to keep its police stance unchanged for a second consecutive meeting,” said TD Securities analysts previewing the Fed event. “Based on the still steady signal provided by the labor market amid still sticky inflation, we expect Chair Powell to double-down on his message of patience regarding policy decisions. We also do not anticipate significant changes to the Fed's SEP or to QT plans for now,” they added.

When will the Fed announce its interest rate decision and how could it affect EUR/USD?

The US Federal Reserve is scheduled to announce its interest rate decision and publish the monetary policy statement with the revised SEP on Wednesday at 18:00 GMT. This will be followed by Fed Chairman Jerome Powell's press conference starting at 18:30 GMT. 

Disappointing macroeconomic data releases from the US, combined with US President Donald Trump’s tariff announcements, revived fears over the US economy tipping into recession. According to the Federal Reserve Bank of Atlanta’s GDPNow model, the US economy is projected to contract at an annual rate of 2.4% in the first quarter.   

In case the dot plot shows a rate cut projection of 75 bps in 2025, this could be seen as a dovish shift in the rate outlook and trigger another leg of the USD selloff. On the flip side, a hawkish revision in the SEP, with officials forecasting a single 25 bps cut, could boost the currency.

If the interest rate projection remains unchanged, investors will scrutinize inflation and growth forecasts. A downward revision to growth expectations could hurt the USD, while an upward revision to inflation forecasts, without a noticeable change in the GDP estimates, could support the USD in the near term.

Powell’s comments could also impact the USD’s performance. If he downplays concerns over an economic downturn and puts more emphasis on the uncertainty surrounding the inflation outlook, citing Trump’s administration’s tariffs, the USD is likely to outperform its rivals in the near term. On the contrary, if Powell acknowledges signs of a worsening growth outlook, the USD is likely to have a difficult time finding demand.

Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:

“EUR/USD remains technically bullish in the near term as it stays in the upper half of the two-month-old ascending regression channel. Additionally, the Relative Strength Index (RSI) indicator on the daily chart holds near 70, reaffirming the bullish stance.”

“On the upside, 1.1000 (upper limit of the ascending channel, round level) aligns as a key resistance level before 1.1100 (static level, round level) and 1.1180 (static level from October 2024). Looking south, the first support level could be spotted at 1.0770 (mid-point of the ascending channel) before 1.0720, where the 200-day Simple Moving Average (SMA) is located. A daily close below the latter support could attract technical sellers and open the door for an extended slide toward 1.0645 (20-day SMA).”