- The FOMC held the federal funds rate at 3.75%, with only Fed Governor Stephen Miran dissenting in favour of a cut.
- The Fed revised its 2026 headline and core PCE inflation forecasts up to 2.7% from 2.4% and 2.5% respectively, with Chair Jerome Powell attributing the rise largely to oil price increases caused by the Iran conflict.
- Bitcoin fell from approximately US$74,000 to US$70,900 in the days around the decision, while the S&P 500 closed down 1.36% and the Nasdaq dropped 1.46% on the day.
The Federal Reserve left its benchmark rate unchanged at 3.50%–3.75% on March 18, signalling that any move toward lower borrowing costs is being delayed by a mix of stubborn inflation, higher energy prices and a softer jobs backdrop.
The vote was 11-1, with Governor Stephen Miran supporting an immediate 25-basis-point cut. Even so, the Fed’s updated projections pointed to a slower easing cycle rather than an imminent shift. Policymakers’ median forecast now implies one cut in 2026 and one in 2027, while seven of 19 officials expect no reduction at all this year.
The projected fed funds rate stands at 3.4% at the end of 2026 and 3.1% in both 2027 and 2028.
Inflation Revised Up, Growth Holding
That more cautious stance came as inflation expectations moved higher. The Fed raised both its headline and core PCE forecasts for 2026 to 2.7%, up from 2.4% and 2.5% in December.
Powell said inflation is still expected to ease, but more slowly than officials had hoped. He also said tariffs are adding roughly 0.5 to 0.75 percentage points to core PCE, which is now running near 3%.
Energy prices were a central part of the pressure. Brent crude rose above US$109 (AU$163.50) a barrel on March 18 after trading near US$72 (AU$108) before the conflict, while U.S. gasoline prices increased by about US$1 (AU$1.50) a gallon in four weeks.
The Fed added new language to its statement acknowledging uncertainty tied to events in the Middle East, and Powell said recent oil disruptions had pushed up short-term inflation expectations.
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At the same time, the central bank did not describe the economy as collapsing. It lifted its 2026 GDP growth estimate slightly to 2.4% from 2.3%.
But labour conditions are becoming less supportive. February’s jobs report showed 92,000 cuts, and adjusted private-sector hiring was effectively flat, reinforcing the view that employment is stable but vulnerable.
Markets reacted negatively after Powell’s press conference. Bitcoin (BTC) fell from around US$74,000 (AU$111K) before the meeting to about US$70,900 (AU$106,350), extending a pattern of weakness around Fed decisions.
US stocks also sold off, with the S&P 500 down 1.36%, the Nasdaq Composite off 1.46%, and the Dow Jones Industrial Average lower by 768 points, or 1.63%. The 10-year Treasury yield climbed to 4.21%.
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