FOMC - No change in rates or median dots but more positive on GDP
The FOMC has left rates unchanged as expected with limited changes to the statement other than to note uncertainty arising from the Middle East with no change in the median dots for 2026, 2027 and 2028. However the FOMC has made upgrades to its growth projections, which can be seen as somewhat hawkish.
The detail in the dots is somewhat hawkish with seven above the median of one 25bps cut in 2026, seven on the median and only five below, with the number on the median up by three compared with December and the number below down by the same amount. The 2027 dots which see one more 25bps easing are not much changed from December. Nor are those for 2028, when the median sees no policy change. The median for the long term has been revised up to the 3.1% seen for 2027 and 2028 from 3,0%, not much of a change but showing that those seeing AI-fueled investment as reducing the neutral rate are not in the majority.
A more positive view on growth is evident, with the long term view raised to 2.0% from 1.8%, with GDP views revised higher for 2026, 2027 and 2028. Unemployment forecasts are not changed but inflation forecasts have been revised higher, particularly for 2027, with overall PCE prices revised up to 2.7% from 2.4% and the core revised to 2.7% from 2.5%, showing that the revision to the overall PCE price view is not solely on energy. The statement’s sole mention of the developments in the Middle East is to say that implications are uncertain. Otherwise the only change to the statement is marginal, saying unemployment has been little changed over recent months rather having showed some signs of stabilization, probably a slightly more optimistic view. There was only one dissent, Miran calling for a far from aggressive 25bps ease. Waller, who dissented in January, voted with the majority.
