FOMC Preview: Is There Still a Fed Put?

FOMC Meeting Key Points

• Traders and economists confidently expect the Fed to leave interest rates unchanged in the 4.25-4.50% range.
• Upside risks to the Fed’s inflation forecast are likely to hamstring Jerome Powell and Company from delivering any imminent interest rate cuts.
• If there’s little hint of an imminent reduction in interest rates, we could see EUR/USD reverse more substantially off the 1.0935 resistance.

When is the FOMC Meeting?

The March 2025 FOMC meeting will conclude on Wednesday, March 19th at 2:00 ET.

Fed Chairman Powell’s press conference will begin at 2:30 ET.

What are the FOMC Interest Rate Expectations?

Traders and economists confidently expect the Fed to leave interest rates unchanged in the 4.25-4.50% range.

As of writing midday Monday, Fed Funds futures traders are pricing in 99% odds of no change to interest rates per CME FedWatch:

Source: CME FedWatch

Assuming the Federal Reserve leaves interest rates unchanged as expected, the market’s focus will immediately shift to the central bank’s Monetary Policy Statement and the Summary of Economic Projections (SEP) for potential market-moving changes. Once traders have digested any tweaks on those fronts, Fed Chairman Jerome Powell’s press conference will be the main volatility catalyst for traders as they seek more clarity on how the Fed is viewing the apparent Q1 slowdown in the world’s largest economy.

FOMC Meeting Forecast

After delivering a 25bps interest rate cut in December, the FOMC is almost certain to leave interest rates unchanged in the 4.25%-4.50% range for the second straight meeting, despite signs of slowing economic growth in the first quarter of the year.

In recent weeks, Federal Reserve policymakers have emphasized the higher-than-usual uncertainty about the economic outlook stemming from trade uncertainties and fiscal policy adjustments, leading them to emphasize a wait-and-see approach to future interest rate changes; in the words of Fed Chairman Powell, “We do not need to be in a hurry and are well positioned to wait for greater clarity.”

When it comes to the central bank’s Summary of Economic Projections, expect negative revisions across the board, with downward revisions to 2025’s GDP forecast (from December’s 2.1% projection) and upward revisions to both its unemployment rate (from 4.3%) and crucially, its inflation forecasts (from 2.5%).

It is the latter – upside risks to the inflation forecast – that is likely to hamstring Jerome Powell and Company from delivering any imminent interest rate cuts until the latter half of the year. Among the Fed’s two mandates, the labor market is relatively closer to the Fed’s target, whereas inflation has been above the central bank’s target for nearly four years straight by now. Against that backdrop, the “Fed Put” of interest rate cuts to stimulate the economy any time growth or markets wobble will likely require far more turbulence than we’ve seen to date.

The hotly-anticipated “dot plot” of interest rate projections will be a key area of focus, but the median expectation for two interest rate cuts may remain unchanged, even if several policymakers expect fewer interest rate cuts this year. As always, the oft-quoted median forecasts can hide relevant details about the distribution of forecasts among FOMC members.

Finally, we are likely to see more questions about the impact of tariffs, DOGE, and the potential for tax cuts at this meeting. As usual, expect Powell to deflect and dodge questions about trade and fiscal policy instead re-emphasizing that the central bank doesn’t try to predict future policies (e.g. tariffs, tax cuts, etc), only respond to their economic impact if and when they are enacted. These types of questions will inevitably a bigger talking point over the next four years than they have been over the last four years.

US Dollar Technical Analysis – EUR/USD Daily Chart

Source: StoneX, TradingView

From a technical perspective, the world’s most widely-traded currency pair is probing a key resistance level at 1.0935. After an impressive 500-pip rally to start the month, EUR/USD spent the last month consolidating below the 5-month high at 1.0935, alleviating the near-term overbought condition.

With multiple developments to digest, we may see some choppy price action in EUR/USD as traders weigh any changes to the statement against the adjustments to the economic projections, as well as the most important message Fed Chairman Powell tries to convey. That said, traders are currently pricing in a 70% chance of at least one interest rate cut by the Fed’s June meeting, so if there’s little hint of an imminent reduction in interest rates, we could see EUR/USD reverse more substantially off the key 1.0935 resistance level, potentially bringing the key 1.0775 level back into play.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX