The Federal Reserve decided to maintain interest rates between 4.25% and 4.5% at its March meeting and hinted at cutting rates two more times in 2026, aligning with its previous outlook from December.

Additionally, the Fed released updated economic forecasts in its Summary of Economic Projections (SEP), such as the "dot plot" that outlines policymakers' anticipated future interest rate directions.

While the central bank raised its year-end PCE inflation and unemployment rate projections, it reduced its economic growth forecast, mentioning an escalated uncertainty in the economic outlook.

The Fed officials foresee the fed funds rate decreasing to 3.9% this year, consistent with their December projection. Market expectations prior to the decision implied two to three more rate cuts this year, based on Bloomberg data. In 2026, officials anticipate two more cuts, aiming to bring the fed funds rate to 3.4%, matching their December projections.

There is division among officials regarding rate cuts for this year, with fifteen predicting a cut and four expecting no change. This represents a more hawkish stance compared to December. The updated forecasts suggest a cautious approach by the Federal Reserve as they navigate uncertainties like the changing trade narrative of the Trump administration.

The decision signals some officials are skeptical about further easing, underestimating potential inflation increases from tariffs. Concerns about stagflation, a scenario of stagnant growth, persistent inflation, and rising unemployment, have heightened, as reflected in the Fed's adjusted forecasts lowering expectations for economic growth and revising inflation and unemployment estimates upwards.