The Federal Reserve Rates unchanged as expected. Looking at the dot plot, the expectations for the end of 2026 and 2027 remain the same at 3.4% and 3.1% respectively.

Looking at the economic numbers for 2026 compared to the December,

  • PCE inflation moved up from 2.4% to 2.7% while core PCE also rose from 2.5% to 2.7%.
  • GDP was increased modestly to 2.4% from 2.3%.
  • The unemployment rate remained unchanged at 4.4%.

Things started to unravel in the markets as Powell’s comments tilted more to the hawkish side with concerns about inflation.

He suggested that tariff impact may not be a one time affect, and the inflation has been somewhat elevated with above target inflation going on 5 years now.

He was frustrated on the non-housing service inflation remaining elevated, and for goods inflation remaining sticky. He noted that short-term inflation expectations have risen, but long-term expectations remain steady.

On the oil prices said that the price can feed into broader prices and leak into the core. He did say that the longer-term approaches to look through energy shocks, but warned that it does depend on inflationary expectations.

On employment, the Fed chair said that he would not say that employment is more at risk than inflation.

The US stocks started to move to the downside as yields started to move to the upside.

Below is the overview of the Fed chairs comments segregated by topic:

Fed Chair Powell — March 2026 Press Conference Summary

Interest Rates & Policy Stance

  • Policy rate is high-end of neutral, or mildly restrictive — borderline, not definitively one or the other
  • The FOMC’s median rate path projection did not change, but there was a meaningful shift toward fewer rate cuts
  • Vast majority of participants do not see a hike as the next base case
  • If progress on inflation is not seen, we will not see a rate cut
  • Fed has to wait and see on conditions for adjusting policy; must see how the outlook evolves, especially on the Middle East

Inflation

  • Inflation remains somewhat elevated; has been above target for five years
  • Slightly more confidence that tariff-driven inflation will come down in the middle of the year
  • Tariffs should in theory be a one-time effect, but the timing of pass-through is uncertain — not certain it will be one-time
  • Frustrating that non-housing services inflation has not come down
  • Inflation overshoot mainly from goods and tariffs; Fed is waiting for goods prices to return to previous levels
  • A series of inflation shocks have interrupted progress; there will be some ongoing effects going forward
  • Short-term inflation expectations have risen, but long-term expectations remain solid

Economic Outlook & Growth

  • Economy is expanding at a solid pace; overall doing well; low breakeven rate for jobs
  • Growth upgrade likely due to growing confidence in productivity
  • Never thought he’d see this many years of high productivity; generative AI will feed into that — though not yet certain we are seeing AI effects in productivity data
  • Real wages have been rising; will take some years of real earnings gains for people to feel good again

Oil, Energy & Tariffs

  • Lots of ways oil prices can feed into broader prices and leak into core — will have to wait and see
  • Hopes the gas price increase is not for a long period; does not want to speculate; Fed needs to see how it works out
  • Does not have a forecast on oil prices in the event the conflict ends quickly
  • Long-term approach is to look through energy shocks, but that depends on inflation expectations
  • Part of the oil shock is already in the forecast for higher inflation; Fed has not seen hoped-for progress on lowering prices

Labor Market

  • January jobs report was a positive surprise; February was a negative surprise — need to take them together
  • Unemployment little changed since September
  • Would not say employment is more at risk than inflation

Middle East & Geopolitical Risk

  • No one knows the economic impact of the Middle East conflict — “we just don’t know” what effects energy rises will have on consumption and disposable income
  • Will learn a lot by the next meeting; must see how the situation evolves
  • No one on the Committee has a clear picture of how this resolves

Fed Forecasts, Communications & Leadership

  • SEP is never locked in; people are happy to change forecasts; subject to high uncertainty
  • If this was ever a good time to skip an SEP, this would have been one
  • Not much has happened on reviewing communications policy; not many ideas had broad support
  • If his successor is not confirmed before his term expires, he would serve as Fed Chair pro tem; no intention of leaving the Board until the DoJ investigation is over

The US dollar moved higher with the greenbacks gains versus the CHF, AUD and the NZD the biggest movers. Each saw the dollar gain near 1%. The best performer was the Canadian dollar which saw a decline of -0.26% vs the USD.

The USDJPY moved to the highest level going back to July 2024 with the 160.00 the next key target. The high price extended to 159.84 today and trades just off that level.

The EURUSD moved back toward the November 2025 low prices at 1.14687. The low price from last week and early this week near 1.14102 remains another downside target. At session highs today, the price stalled near a swing area high at 1.15549.

Looking at the dot plot, theSD moved up to test its 200 hour moving average at 1.33525 at session highs, but stalled at that level and rotated below its 100 hour moving average at 1.33084 during the chairman’s testimony. Low price reached 1.3275 which was near the low price from yesterday’s trade. The March 3 low at 1.3252 would be the next target followed by the low price from March at 1.3217.

The US stocks closed sharply lower. Both the Dow and the Russell 2000 fell by -1.6%. The Nasdaq and the S&P fell by -1.46% and -1.36% respectively. The Nasdaq index closed below the 200 day MA at 22223.46 for the 2nd time since Friday. The Nasdaq closed t 22152.42. The S&P closed just above the 200 day MA at 6615.70 (closed at 6624.70).