Jerome Powell speaks on policy outlook after leaving interest rate unchanged

Federal Reserve Chairman Jerome Powell explains the decision to leave the policy rate, federal funds rate, unchanged at the range of 5.25%-5.5% and responds to questions in the post-meeting press conference.

Fed meeting press conference key quotes

"The economy has made considerable progress."

"Inflation has eased substantially."

"Ongoing progress is not assured, though."

"The path forward is uncertain."

"GDP has been bolstered by strong consumer demand as well as healing supply chains."

"High interest rates have weighed on business fixed income investment."

"FOMC participants expect rebalancing in labor market to continue."

"Longer-term inflation expectations remain well-anchored."

"We need greater confidence of inflation moving sustainably down before we cut rates."

"We will make decisions meeting by meeting."

"Unexpected weakness in labor market could warrant a response too."

"Our projections are not a plan, we will adjust based on conditions."

"Inflation data came in a little bit higher than expected. Nevertheless, we continue to make good progress on bringing inflation down."

"There's some confidence that lower market rent increases in housing will show up over time."

"I assume we will continue to see goods prices continue into a new equilibrium."

"The risks are really two-sided now. First rate cut is therefore consequential."

"January inflation numbers were quite high but reason to think there were seasonal affects there."

"February was also high, but not terribly."

"Taking January and February together have not changed the overall story."

"Those January and February inflation numbers did not add to our confidence."

"We are not going to overreact to these two months of data; nor ignore them."

"If we are getting a lot of supply and demand, you could potentially have a bigger economy where inflation pressures are not increasing."

"Strong hiring all by itself would not be a reason to hold off on rate cuts."

"Strong job growth is not a reason for us to be concerned about inflation."

"High inflation was not caused mostly by wages; that said we need to see more gradual movement downwards on wage inflation."

"We need to be careful on when we start to cut rates."

"Ultimately, we do think financial conditions are weighing on economic activity."

"Fed is discussing slowing pace of runoff."

"In terms of timing, no more specific than fairly soon."

"Liquidity is not evenly distributed."

"We might be able to get to a lower level of reserves this time."

"We are looking at what would be best pace and best structure."

"Our longer run goal is to return to balance sheet that is mostly treasuries."

"By going slower on balance sheet, we think we can get further."

"It will mean we run much less risk on liquidity issues."

"We will be monitoring money market conditions carefully to know when to stop on balance sheet runoff."

"There isn't a dollar of % of GDP amount that we have in mind; we will look at indicators to tell us when we are close."

"We want to have a buffer on reserves. We don't want to find ourselves in the 2019 situation again."

This section below covers the market reaction to the Federal Reserve policy statement and the revised Summary of Projections.

The US Federal Reserve (Fed) announced on Wednesday that it left the policy rate, federal funds rate, unchanged at the range of 5.25%-5.5% following the March meeting. This decision came in line with the market expectation.

In its policy statement, the Fed reiterated that it does not expect to cut rates until it has greater confidence that inflation is moving sustainably to the 2% target. Meanwhile, the revised Summary of Economic Projections showed that officials forecast a 75 basis points reduction in the policy rate in 2024, the same as in December.

Key takeaways from Fed policy statement

"Inflation has cooled over past year but remains elevated."

"Fed remains strongly committed to getting inflation back to 2%."

"Risks to employment, inflation goals are moving into better balance."

"Economic outlook is uncertain, central bank is highly attentive to inflation risks."

"Economic activity expanding at solid pace, job gains remain strong, unemployment rate low."

"Fed maintains current pace of balance sheet drawdown."

Key takeaways from the dot plot

  • Fed projections show 2024 policy rate view unchanged at 75 basis points of reductions
  • Fed projections show one fewer rate cut in 2025 than previously forecast
  • Fed projections show higher longer-term policy rate projection at 2.6% vs 2.5%
  • Fed projections show 9 of 19 officials see policy rate above 4.6% median forecast for 2024
  • Fed projections show only one official sees more than three 25 bp rate cuts in 2024
  • Fed policymakers see end-2024 PCE inflation at 2.4%, unchanged from December projection; core seen at 2.6% versus 2.4%
  • Fed policymakers upgrade 2024 GDP growth forecast to 2.1% from 1.4%, see unemployment rate at 4.0% vs 4.1% in December projection

Market reaction to Fed policy announcements

The US Dollar came under modest bearish pressure with the immediate reaction to the Fed's policy decisions and the revised dot plot. At the time of press, the US Dollar Index was down 0.07% on the day at 103.75.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Canadian Dollar.

USD   -0.09% -0.07% -0.26% -0.24% 0.42% 0.03% 0.26%
EUR 0.10%   0.03% -0.17% -0.13% 0.53% 0.13% 0.34%
GBP 0.10% 0.00%   -0.18% -0.11% 0.50% 0.12% 0.32%
CAD 0.27% 0.18% 0.23%   0.03% 0.69% 0.25% 0.51%
AUD 0.22% 0.13% 0.15% -0.04%   0.64% 0.26% 0.47%
JPY -0.42% -0.51% -0.50% -0.66% -0.65%   -0.42% -0.17%
NZD -0.04% -0.12% -0.11% -0.29% -0.27% 0.34%   0.19%
CHF -0.24% -0.33% -0.30% -0.50% -0.48% 0.19% -0.20%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).


This section below was published at 10:00 GMT as a preview of the Federal Reserve's monetary policy decisions.

  • The Federal Reserve is widely anticipated to keep interest rates unchanged.
  • The revised dot plot and Fed Chairman Powell’s remarks could provide important clues about the policy outlook.
  • The US Dollar could find extra legs in case of a hawkish outcome.

The Federal Reserve (Fed) will announce monetary policy decisions following the March meeting and release the revised Summary of Economic Projections (SEP), the so-called dot plot, on Wednesday. Market participants widely anticipate that the US central bank will leave the policy rate unchanged at 5.25%-5.5% for the fifth consecutive meeting.

The CME FedWatch Tool shows that markets see little to no chance of a rate cut in May. Hence, investors will scrutinize the SEP and comments from Fed Chairman Jerome Powell to try to confirm or deny a policy pivot in June. According to the FedWatch Tool, there is a 43% probability that the Fed will leave rates unchanged in June.

The dot plot published in December showed that policymakers were forecasting a total of 75 basis points (bps) reduction in the policy rate in 2024. The publication further pointed out that Fed officials saw inflation averaging 2.4% in 2024 before returning to the 2% target in 2026.

Macroeconomic data releases since the December policy meeting showed that consumer inflation and producer inflation started to edge higher in the first couple of months of the year. Additionally, the labor market remained relatively healthy while activity-related data, such as the forward-looking PMI surveys, suggested that the US is very likely to avoid a recession.

Previewing the Fed event, “the FOMC is widely expected to keep the Fed funds target range unchanged at 5.25%-5.50% next week, with Chair Powell likely continuing to argue for patience regarding the Committee's next policy steps amid the recent firming of inflation,” said TD Securities analysts in a weekly report and added: “We also look for the Fed to maintain its median projection for 3 cuts this year, and for the release of preliminary details about QT plans.”

When will the Fed announce policy decisions and how could they affect EUR/USD?

The Federal Reserve is scheduled to announce its rate decision and publish the monetary policy statement alongside the SEP at 18:00 GMT. This will be followed by Chairman Powell's press conference at 18:30 GMT. 

In case the new dot plot reaffirms that officials are still favoring 75 bps cuts, this could result in markets leaning toward a pivot in June. In this scenario, the initial market reaction is likely to trigger a decline in the US Treasury bond yields and weigh heavily on the US Dollar (USD). On the other hand, policymakers could favor a 50 bps reduction in the interest rate this year, citing a relatively healthy labor market and stronger-than-forecast consumer and producer inflation figures since the beginning of the year. This could be seen as a hawkish surprise and provide a boost to the USD. A 75 bps rate cut projection with an upward revision to the 2024 inflation forecast could help the USD limit its losses. 

In the post-meeting press conference, Chairman Powell could refrain from commenting on the timing of the policy pivot and reiterate the data-dependent approach. In this case, changes in the dot plot could continue to drive the USD’s valuation. If Powell adopts an optimistic tone about the inflation outlook and leaves the door open for a rate cut in June, the USD’s gains could remain limited even if the SEP points to 75 bps cuts in 2024.

FXStreet Analyst Yohay Elam shares his thoughts on the potential market reaction: “I want to stress that the reaction to the Fed decisions is multi-layered. Investors usually react to the dot plot before reversing the initial move. They then respond to Powell's words but may have a rethink once the dust settles and analysis of the bank's message surfaces.”

“The long-term reflection of the decision would be seen in the odds for a rate cut in June, which currently stands at roughly 50-50,” he said.

To summarize, it will not be easy to navigate through the policy statement, the dot plot and Powell’s remarks. The USD volatility is likely to heighten during the event and it could be less risky to wait until the excitement fades away to determine a direction for the currency. The action in bond and stock futures markets the next day could provide a clue on whether markets saw the Fed announcements as dovish or hawkish.

Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:

“Following the latest decline, EUR/USD stays near the 20, 50, 100 and 200-day Simple Moving Averages (SMA) and the Relative Strength Index (RSI) indicator on the daily chart struggles to hold above 50, reflecting buyers’ hesitancy.”

“If EUR/USD stays below the 1.0870-1.0840 area (20-day SMA, 50-day SMA, 100-day SMA, 200-day SMA) and confirms the lower limit of this range as resistance, technical sellers could take action. In this case, 1.0785 (Fibonacci 50% retracement of the October-December uptrend) and 1.0700 (Fibonacci 61.8% retracement) could be seen as the next bearish targets. On the upside, 1.0950 (Fibonacci 23.6% retracement) aligns as strong resistance before 1.1000 (psychological level) and 1.1100 (end-point of the long-term uptrend).”


Dot Plot FAQs

The “Dot Plot” is the popular name of the interest-rate projections by the Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed), which implements monetary policy. These are published in the Summary of Economic Projections, a report in which FOMC members also release their individual projections on economic growth, the unemployment rate and inflation for the current year and the next few ones. The document consists of a chart plotting interest-rate projections, with each FOMC member’s forecast represented by a dot. The Fed also adds a table summarizing the range of forecasts and the median for each indicator. This makes it easier for market participants to see how policymakers expect the US economy to perform in the near, medium and long term.

The US Federal Reserve publishes the “Dot Plot” once every other meeting, or in four of the eight yearly scheduled meetings. The Summary of Economic Projections report is published along with the monetary policy decision.

The “Dot Plot” gives a comprehensive insight into the expectations from Federal Reserve (Fed) policymakers. As projections reflect each official’s projection for interest rates at the end of each year, it is considered a key forward-looking indicator. By looking at the “Dot Plot” and comparing the data to current interest-rate levels, market participants can see where policymakers expect rates to head to and the overall direction of monetary policy. As projections are released quarterly, the “Dot Plot” is widely used as a guide to figure out the terminal rate and the possible timing of a policy pivot.

The most market-moving data in the “Dot Plot” is the projection of the federal funds rate. Any change compared with previous projections is likely to influence the US Dollar (USD) valuation. Generally, if the “Dot Plot” shows that policymakers expect higher interest rates in the near term, this tends to be bullish for USD. Likewise, if projections point to lower rates ahead, the USD is likely to weaken.


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