US Market - More Uncertainty

Last night (20th March 2025), FOMC maintained interest rates within the range of 4.25% to 4.5%, slowed the pace of Treasury bond holdings reduction to $5 billion, and kept the reduction pace for Mortgage-Backed Securities (MBS) unchanged. Influential board member Christopher Waller voted against this decision, preferring to maintain the original pace of securities holdings reduction. The statement removed language suggesting that risks to employment and inflation goals were broadly balanced, noting instead that uncertainty about the economic outlook has increased.

FOMC significantly lowered its economic growth forecast for this year by 0.4 percentage points to 1.7%, and raised its core PCE inflation projection by 0.3 percentage points to 2.8%. The unemployment rate forecast was also increased by 0.1 percentage point to 4.4%.

Regarding the "dot plot," the projections for two rate cuts in both this year and next remain unchanged. However, the number of officials predicting no rate cuts this year increased from one to four, while those expecting two cuts decreased from ten to nine.

In a press conference, Powell repeatedly emphasized uncertainty, stating that the risk of economic recession has risen but remains low. He reiterated that there is no rush to adjust the stance, noting that the current position allows for both rate cuts and maintaining restrictions. Short-term inflation expectations have risen, while long-term expectations remain stable. The baseline forecast still assumes that inflation driven by tariffs will be temporary (are you sure?).