NEW YORK, March 18 (Reuters) – The Federal Reserve held its policy rate steady on Wednesday, as was widely expected, citing somewhat elevated inflation and giving little indication when it might next cut short-term borrowing costs. Fed officials’ economic projections indicated they expect to cut rates once again this year, largely in line with the Wall Street estimate.
MARKET REACTION:
STOCKS: The S&P 500 declined after the policy statement, leaving it down on the day by 1.4%. Selling was broad-based, with the Dow industrials down 1.6% and the Nasdaq Composite off 1.5%.
BONDS: The yield on benchmark U.S. 10-year notes was up 6 basis points at 4.26%. Selling was stronger in shorter-dated debt, with the yield on 2-year U.S. notes rising 10 basis points to 3.77%, a sign of waning rate-cut expectations.
FOREX: The dollar index was up 0.6% to 100.19.
COMMENTS:
JACK ABLIN, CHIEF INVESTMENT OFFICER, CRESSET CAPITAL, CHICAGO:
“The big takeaway is I think Chairman Powell has moved clearly to neutral from what I would have thought was a slightly dovish stance. I’m sure there’s going to be a growing school of thought that says they won’t cut at all this year.”
CHRISTOPHER HODGE, CHIEF U.S. ECONOMIST, NATIXIS, NEW YORK:
“This meeting appropriately struck a balanced tone that could be interpreted in a variety of ways. The Fed’s reaction function going forward will be determined by the passthrough of higher energy prices to core inflation and any shock to growth from the war. Higher prices at the pump will dampen consumer spending – the question will be to what extent, for how long, and how this will affect the labor market. With a sizable number of hawks still concerned with lingering inflation, the onus will be on incoming data to guide policy. We expect the energy shock to weigh on growth and hiring while pushing inflation higher. For now, we maintain our call for two Fed rate cuts this year, but acknowledge that upside inflation risks could lead to a prolonged pause.”
MARK SPINDEL, CHIEF INVESTMENT OFFICER, POTOMAC RIVER CAPITAL, WASHINGTON, D.C.:
“The surge in oil prices gave them another way to punt on making a decision, although they remain upbeat. Overall, there wasn’t much news in the decision, the press conference or the news communique. We thought they would sit on their hands and they did; we thought that there would be a dissent and there was.
“But I found Jay to be appropriately humble as to the near term economic outlook and the clarity of the Fed’s crystal ball. The market is trapped amidst a whole lot of reason to be nervous, a lot of reasons to be uncertain, including what is happening at the Fed. The one piece of news, I think, was that he made it very clear that he is not leaving the board until the legal situation is been resolved, which tells me that he’s trying to maximize the limited by still powerful leverage that gives him with the president.”
MARK HACKETT, CHIEF MARKET STRATEGIST, NATIONWIDE INVESTMENT MANAGEMENT GROUP, PHILADELPHIA:
“The press conference was notable for the honesty in admitting the degree of uncertainty, saying ‘We don’t know’ and that policy is modestly restrictive. The Fed is unlikely to be a significant positive or negative catalyst for risk assets this year with Iran, inflation, AI and corporate profits the likely drivers.”
ANTHONY SAGLIMBENE, CHIEF MARKET STRATEGIST, AMERIPRISE FINANCIAL, TROY, MICHIGAN:
“Overall, as expected in terms of the policy statement, in terms of the fed funds rate. I would say the SEPs and even a little bit in the statement, a little bit of a dovish tilt right there.
“There’s recognition that tensions in the Middle East are something that you know the committee now has to monitor. The statement overall kind of still pointed to healthy economic conditions, modest job gains and stable unemployment, even though inflation is elevated.
“The SEPs are a little bit dovish in the way I’m reading them – growth ticked up in for 2026, unemployment rate held steady and that was despite inflation expectations ticking up for both PCE inflation and core PCE inflation.”
CHRIS GRISANTI, CHIEF MARKET STRATEGIST, MAI CAPITAL MANAGEMENT, NEW YORK:
“This gives me confidence that the Fed is being vigilant. Moreover, today’s statement makes me think that the consensus opinion that higher oil prices mean a more hawkish Fed is incorrect. I think the Fed is more concerned about the economic slowdown effects of an oil shock and may be more likely to come down on the side of easing.
“There are so many possible scenarios here, many with opposite outcomes, so I have rechecked my research and am standing pat with solid investments – just like the Fed is doing.
“It’s way too late to buy energy or defense stocks. I think these should be avoided here.”
DAVID SEIF, CHIEF ECONOMIST FOR DEVELOPED MARKETS, NOMURA, NEW YORK:
“The statement and SEP were less eventful than expected, especially in light of the Timiraos article last night that made it seem like there could be a much bigger movement in the dots than we expected. We turned out to be correct that the median 2026 dot didn’t change. Bottom line, the lack of major changes to the statement or dots make it seem as though there is not yet widespread pushback from the core of the committee ex-Powell against the easing bias or forward guidance.”
ART HOGAN, MARKET STRATEGIST, B. RILEY WEALTH MANAGEMENT, BOSTON: “This was surprisingly less hawkish than it could have been. Unsurprisingly there was no rate change, even more unsurprisingly, the dissent came from Miran. What was interesting is that they downgraded their inflation outlook and upgraded the economic growth outlook. In the current environment, that’s probably appropriate, although they don’t have any data that includes the impact of the war in Iran. Even today’s PPI data doesn’t include Iran. So the closest they could come to not saying anything at all about the outlook was this, and that it’s in light of the data that they already have. What we won’t be hearing talk about now is any reference to the inflationary pressures being ‘transitory’; what I do expect is Powell to say they are keeping a very close eye on inflation.”
MICHAEL ROSEN, CHIEF INVESTMENT OFFICER, ANGELES INVESTMENTS, SANTA MONICA, CALIFORNIA:
“The Fed statement was largely in-line with market expectations, and doesn’t change our investment views. At the margin, the Fed is a bit more hawkish, with only one dissent for an easing (Miran) versus three dissents at the prior meeting. Forward expectations, the ‘dot plot,’ were also in-line with expectations, although with a small shift upwards in future rates. One cut in the Fed funds rate is the expectation for this year and next year.”
SAM STOVALL, EQUITY MARKETS STRATEGIST, CFRA, ALLENTOWN, PENNSYLVANIA:
“I think what they’re telling us is that they’re a bit more concerned about oil’s upward pressure on inflation while at the same time telling us that they believe the economy remains stable and solid. The belief seems to be that the inflation situation could end up resolving itself in the near term before having a deleterious effect on the economy: that it will be a speed bump rather than a brick wall.”
DANIEL SILUK, HEAD OF GLOBAL SHORT DURATION & LIQUIDITY, JANUS HENDERSON INVESTORS, NEWPORT BEACH, CALIFORNIA:
“The Fed delivered a fully expected hold, but the tone came through more cautiously balanced than hawkish. The statement explicitly notes that job gains remain low, inflation is ‘somewhat elevated,’ and uncertainty from Middle East developments clouds the outlook, marking a clearer recognition of two sided risks. While Stephen Miran again dissented in favor of a 25bp cut, the fact that he was the sole dissenter, despite some expectations of broader dissent, suggests the committee is still largely unified behind a steady hand approach. The Fed affirmed patience, acknowledged geopolitical uncertainty and resisted a more hawkish pivot even with firmer inflation projections, likely a relief for markets already tightened by recent volatility.”
MATTHIAS SCHEIBER, HEAD OF THE MULTI-ASSET TEAM, ALLSPRING GLOBAL INVESTMENTS, LONDON:
“While the bigger macroeconomic picture will likely be affected by rising geopolitical risks, it’s too early to know the degree to which this will impact U.S. fundamentals and the central bank’s reaction function. Job market data have weakened, as has the official gross domestic product data for the fourth quarter, but overall economic growth seems to be less affected – for now, at least.
“Inflation numbers have been broadly in line with expectations, but more time is needed to get inflation back to target. With the increased likelihood of more fiscal spending to cushion the consumer from higher energy prices, the Fed is likely to stay data dependent and keep rates on hold. Market consensus has repriced already with only one rate cut expected this year, down from three rate cuts priced in just last month, and materially higher yields are on offer at the front of the yield curve.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:
“It’s obviously no surprise. What we’re seeing here is a Fed that is very cautious and is saying, ‘look, we don’t know what’s going to happen, what the effects of the war are going to be, especially when it comes to energy prices.’
“I don’t think we’re looking at any interest rate cuts until maybe the fourth quarter, if we get one and it all depends on what happens with energy prices. Now if energy prices do not come down within a reasonable time and remain even at these levels, it’s going to mean higher inflation and you’re going to have an economy that’s probably growing at less than 1% with higher inflation, which equates to stagflation.”
STEPHEN KOLANO, CHIEF INVESTMENT OFFICER, INTEGRATED PARTNERS, WALTHAM, MASSACHUSETTS:
“Markets largely anticipated no rate action at this meeting, and focus will now shift to the Fed’s commentary. Producer prices came in higher than expected this morning, further contributing to the uncertain inflation outlook; notably, these figures did not yet reflect the impact of the Iran conflict. Additionally, the Bank of Canada also held rates steady in its decision earlier today.
“One potential area to revisit in portfolios is small caps, which had been performing well on expectations of rate cuts and a solid economy. However, with rate cuts now pushed further out and the longer-term impact of higher energy prices still uncertain, we may begin to see a pullback in small caps—particularly in the higher-beta areas of the market that established leadership in the latter part of 2025 and early 2026.”
LINDSAY ROSNER, HEAD OF MULTISECTOR FIXED INCOME INVESTING, GOLDMAN SACHS ASSET MANAGEMENT, NEW YORK:
“The Fed will remain in ‘wait-and-see’ mode for now, pending clarity on developments in the Middle East. Despite higher inflation forecasts the FOMC retains an easing bias, with a narrow majority on the committee expecting cuts to resume this year. We still see room for two ‘normalization’ cuts in 2026, although their timing remains dependent on the length of the conflict.”
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO:
“The Federal Reserve left interest rates unchanged and made relatively minor changes in its policy statement, suggesting that officials plan to follow long-standing monetary policy orthodoxy in ‘looking through’ the energy price shock now rolling across the global economy.
“The consistent tone, paired with a fresh set of projections showing lower growth, weaker employment and higher inflation than in December, marks the clearest signal yet that Chair Jay Powell’s Fed sees higher energy prices playing a temporary but demand-destructive role in the US economy.
“With policymakers seemingly intent on resisting pressure to act in either direction, rate expectations are holding firm across the front end of the curve, reinforcing today’s advance in the dollar.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“The real action was in the Summary of Economic Projections. They’re only guessing about what will happen with oil prices, but inflation is projected to run 0.3 percentage points hotter without a material drag on growth. That could be optimistic on their part. It’s similar to how they overestimated the effect of tariffs on inflation and underestimated the growth drag. 2026 could be like the last two years where there’s a shock, they end up being surprised, and they cut in September.”
GENNADIY GOLDBERG, HEAD OF US RATES STRATEGY, TD SECURITIES, NEW YORK:
“Yields are moving a little bit lower, I think just on relief that the dots for 2026 and 2027 didn’t reflect fewer rate cuts, as some investors were worried that they would. The statement itself just mentions uncertainty in the Middle East and the uncertainty in that pass through to the U.S. economy.
“Otherwise, I think the Fed is effectively staying on hold, just waiting and watching to see how this affects the economy. I think markets are going to be looking for Powell’s remarks at 2:30 for any sort of direction, although I doubt Powell wants to pound the table one way or the other just because of the worry that the Middle East conflict can weigh on both growth and push inflation higher at the same time. And that’s something that’s concerning to the Fed.”
(Reporting by Suzanne McGee, Saqib Ahmed, Chuck Mikolajczak, Laura Matthews, Karen Brettell, Saeed Azhar, Stephen Culp; editing by Colin Barr)
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