As the market expected, the Fed continued to hold steady and reiterated that it will wait until it is more confident about inflation before cutting interest rates. At the same time, the dot plot suggests that Fed officials' expectations for interest rates in the next two years and beyond are higher than before, warning that long-term interest rates will be higher than expected.

On Wednesday, March 20, Eastern Time, the Federal Reserve announced after the FOMC meeting of the Monetary Policy Committee that the target range for the federal funds rate remains at 5.25% to 5.50%. Since raising interest rates last July, the Fed has kept the policy rate at a 22-year high.

During the current tightening cycle from March 2022 to the present, the Federal Reserve has not raised interest rates for five consecutive meetings. As with the previous 13 meetings since July 2022, FOMC voting members unanimously supported this interest rate decision.

The dot plot shows that the number of people who expect to cut interest rates three times this year has increased by three, and the number of people who expect to cut interest rates four times remains only one.

The dot plot shows that compared with the dot plot released in December last year, Fed officials' forecasts for the number of interest rate cuts this year are more concentrated at three. Of the 19 Fed officials who have provided rate forecasts, a total of 15 expect rates to fall below 5.0% this year, one less than the last time they did so.

Among these 15 people, five people predict that the interest rate will be between 4.75% and 5.0%. Estimating each interest rate cut by 25 basis points is equivalent to two interest rate cuts this year. The number of people who predict this is the same as the last dot plot, and nine people predict that the interest rate will be between 4.75% and 5.0%. 4.50% to 4.75%, equivalent to three expected interest rate cuts this year, three more than the last dot plot.

Looking at it this way, a total of ten out of 19 Fed officials, accounting for nearly 53%, expect to cut interest rates at least three times next year, which is roughly the same as the number of people who predicted this in the last dot plot. The number of people predicting at least four interest rate cuts has significantly decreased. Only one person predicts interest rates at 4.25% to 4.50%, which is equivalent to four interest rate cuts. There are three fewer people than the last dot plot prediction. Last time, one person predicted interest rates to be lower than 4.0%, but no one predicted this this time.

The rate will still be cut by 75 basis points this year, and interest rate expectations for next year and longer term will be raised.

The median interest rate forecast of Fed officials released after the meeting showed that compared with the last outlook forecast in December last year, Fed officials kept their policy interest rate expectations for this year unchanged and raised their interest rate expectations for next year. The place values are as follows:

The federal funds rate at the end of 2024 is 4.6%, unchanged from the December 2023 forecast.

The federal funds rate at the end of 2025 is 3.9%, an increase of 30 basis points from the 3.6% expected in December.

The federal funds rate at the end of 2026 is 3.1%, an increase of 20 basis points from the 2.9% expected in December.

The longer-term federal funds rate is at 2.6%, up 10 basis points from the December forecast of 2.5%.

Based on the latest median forecast, Fed officials expect that by the end of this year, when interest rates average 4.65%, they will cut interest rates by 75 basis points this year, which is equivalent to a total of three 25 basis point interest rate cuts, exactly the same as the forecast last December. . The increase in annual interest rate expectations next year is equivalent to missing one or nearly one 25 basis point interest rate cut.

GDP growth and core PCE inflation forecasts for this year are raised, while unemployment rate forecasts are lowered.

The economic outlook released after the meeting showed that Fed officials have raised their GDP growth forecasts for this year and the next three years. This year's GDP growth forecast will be significantly increased by 0.7 percentage points, or 70 basis points, and will be raised by 20 and 10 basis points respectively in the next two years. The unemployment rate expectations for this year and the year after are slightly lowered by 10 basis points, next year's PCE inflation expectations are slightly raised by 10 basis points, and this year's core PCE inflation expectations are expected to be raised by 20 basis points.

The specific adjustments are as follows:

The GDP growth rate is expected to be 2.1% in 2024, 1.4% in December, 2.0% in 2025, 1.8% in December, 2.0% in 2026, and 1.9% in December. The longer-term expected growth rate is 1.8%, unchanged from the December forecast.

The unemployment rate in 2024 and 2016 is expected to be 4.0%, both lower than the December forecast of 4.1%. The unemployment rate in 2025 is still expected to be 4.1%. The longer-term unemployment rate after 2026 is expected to be 4.1%, both unchanged from December. .

The PCE inflation rate in 2024 is expected to be unchanged from December's 2.4%, 2025 is expected to be 2.2%, December is expected to be 2.1%, and 2026 and longer-term expectations are both unchanged from December's 2.0%.

Core PCE is expected to be 2.6% in 2024 and 2.4% in December. The forecasts for 2025 and 2026 are 2.2% and 2.0% respectively, both unchanged from the December forecast.