The Federal Open Market Committee decided not to surprise markets by raising rates by 25 bips, according to the FOMC announcement from the March meeting.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 4-3/4 to 5 percent.
Unanimous. While Chairman Jerome Powell said in the subsequent press conference that a pause to the rate hikes was considered in the days leading up to the meeting. However, he went on to say that the consensus for a hike was strong. The vote ended up being unanimous.
Terminal Rate. A lot of chatter heading into this meeting as to whether or not the Fed would lower its terminal rate which is the ultimate interest rate level that the Federal Reserve sets as its target for a cycle of rate hikes. However, the Summary of Economic Projections had the 2023 terminal rate unchanged from the December meeting at 5.1% which would indicate just one more rate hike.
- The 2024 terminal rate was raised to 4.3% from the 4.1% from the December meeting. 2025 was unchanged at 3.1%.
No Cuts. Chair Powell in the presser was asked about traders’ pricing in rate hikes later this year. Powell responded “participants don’t see rate cuts this year. We just don’t” Powell went on to state “the path of the economy is uncertain and policies are going to reflect what actually happens rather than what we write down in the SEP. But that is not our baseline expectation.”