The Federal Reserve kept interest rates unchanged Wednesday between 5.25% and 5.5% at its March meeting, as widely expected by investors, confirming intentions to lower the cost of money in the coming months.

While the policy statement provided little variation from January, the Federal Open Market Committee (FOMC) released the much-anticipated new staff economic projections.

March Fed Dot Plot Reveals 3 Cuts For 2024

The March 2024 Fed Dot Plot revealed a median preference for three rate cuts in 2024, with rates expected to reach a midpoint range of 4.6% by year-end.

The potential strategy confirmed what Federal Reserve outlined in December 2023, allaying fears of a downwardly revision to rate cuts after the recent hotter-than-expected inflation data.

However, in the latest Fed projections, 9 out of 19 officials are now indicating a policy rate above the 4.6% median forecast for 2024. This suggests a significant division within the board regarding the pace of upcoming rate cuts.

Looking ahead to 2025, the Fed now eyes the possibility of three rate cuts, down from four earlier, aiming for a midpoint fed funds rate of 3.9% by year-end. For 2026, the Fed projected rates to be at 3.1% by the end of the year, up from the 2.9% earlier.

The longer-term policy rate remains has been revised slightly higher to 2.6%.

The latest economic growth projections have significantly raised the estimates for 2024 to 2.1%, up from 1.4% in December.

Growth projections for 2025 and 2026 have been also upwardly revised to 2%, up from 1.8% and 1.9% respectively.

As for the unemployment rate, there has been a minor reduction from 4.1% to 4% for 2024, while estimates remained consistently steady at 4.1% throughout the forecasted period.

The Federal Reserve has slightly revised to the upside the annual change in the Personal Consumption Expenditure (PCE) index from 2.4% to 2.5% for 2025, while keeping projections unchanged for 2024, 2026 and the longer run.

Core PCE saw a meaningful adjustment for 2024, with projections now hinting at 2.6%, versus 2.4% earlier.

Market Reactions

  • Stocks rose minutes after the Fed statement, with the SPDR S&P 500 ETF Trust (SPY  ) up 0.4%.
  • 2-year Treasury yields moved down by about 5 basis points, while longer-dated yields remained steady.
  • The U.S. dollar index, as gauged by the the Invesco DB USD Index Bullish Fund ETF (UUP  ), slightly eased 0.1%
  • Gold, as tracked by the SPDR Gold Trust (GLD  ), rose 0.5%.