The US Federal Open Market Committee (FOMC) kept the federal funds rate unchanged at 3.50–3.75% during its March 2026 meeting. The policy statement noted that the implications of developments in the Middle East for the US economy are uncertain.

The Committee raised its growth outlook, increasing the median projection for Q4 2026 GDP growth to 2.4%, up from 2.3% in the December 2025 Summary of Economic Projections. US economic data remains robust, potentially driven by AI-related investment spending. However, economic policy uncertainty appears to be rising again.

Inflation projections were also revised higher. The core PCE inflation forecast for Q4 2026 was increased to 2.7% from 2.5% in the December policy. At the post-policy press conference, Powell noted that, in the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.

FOMC revised the unemployment rate marginally higher for 2027. The statement highlighted that job gains have remained low, and the unemployment rate has remained little changed.

The FOMC dot plot maintained only a 25-bps cut in 2026 and another 25-bps cut in 2027. However, Powell mentioned that projected rate cuts would depend on further progress in reducing inflation. He, however, dismissed comparisons to stagflation, stating that current economic conditions do not justify that characterisation. He acknowledged ongoing high uncertainty, but added that the Fed could look past energy-driven shocks as long as inflation expectations remain well anchored.

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