The interest rate decision today will be a straightforward one, with the Fed set to leave policy unchanged. There might be slight tweaks to the statement, with focus on the risks to the economy especially the labour market. As for forward guidance, that is likely to be maintained as per December.
That leaves us with Fed chair Powell's press conference and how he will want to communicate today's decision. Will it be a dovish hold? Or perhaps he will try to be stubborn in his final few meetings in setting out expectations for a longer hold?
The latter seems unlikely as the Fed would definitely like to retain optionality and flexibility. But in any case, the fact that the Fed won't cut interest rates today will irk Trump and he may hit back by announcing his choice of Fed chair shortly after. So, be on the lookout for that.
With the Fed not set to ease further today, what are the expectations moving forward though?
Fed funds futures are pricing in ~48 bps of rate cuts for the year with the first full 25 bps rate cut priced in for July currently. Let's see what analysts have to say about the Fed outlook.
Financial Institution | Total Projected Rate Cuts (bps) | Projected Timing (Months) | FOMC Stance Summary | Powell Communication Strategy | Economic Risks Cited |
|---|---|---|---|---|---|
Citi | 75 bps | March, July, and September | Likely to deliver more cuts than priced into the market. | - | Soft labour market and cooling inflation. |
Barclays | 50 bps | June and December | No rush to cut rates further; risks to employment and inflation are balanced. | Reinforce the message that the FOMC is in no rush to cut rates. | Downside risks to employment and upside risks to inflation. |
BofA | 50 bps | June and July | Firmly on hold; balance of risk remains unchanged. | Potential for a dovish surprise; messaging may be dominated by political context. | Politics and market pricing. |
Goldman Sachs | 50 bps | June and September | Future cuts aimed at normalisation; requires stronger consensus and inflation progress. | Emphasise that previous cuts stabilise the labour market; Fed is well-positioned for now. | Inflation progress and labour market stability. |
Wells Fargo | 50 bps | March and June | Higher hurdle to justify further easing the longer the FOMC waits. | Unlikely to hint at easing at the March meeting; likely to deflect questions on the DOJ investigation. | Economic grounds for easing and range of participant views. |
JP Morgan | 0 bps | No rate cuts | Many participants believe now is a good time to pause. | Indicate policy is well-positioned for both mandates; avoid discussing political issues. | Risk management and dual mandates (employment and inflation). |
Barclays
- 50 bps of
rate cuts in 2026 (June and December)
- “We
expect the FOMC to… signal it is in no rush to cut rates further. We think it
will indicate that it views downside risks to employment and upside risks to
inflation as more balanced.”
- Powell to reinforce the message the FOMC is in no rush to
cut rates.
BofA
- 50 bps of rate cuts in 2026 (June and July)
- “Politics may take center stage at the Jan FOMC meeting.
The Fed is firmly on hold, and the balance of risk hasn't changed.”
- Powell presser “might be dominated by questions about
politics rather than policy. On the latter, however, market pricing creates
risks of a dovish surprise.”
Citi
- 75 bps of rate cuts in 2026 (March, July, and September)
- “Over the course of this year, a soft labour market and
cooling inflation mean the Fed will likely deliver more cuts than are priced
into the market.”
Goldman Sachs
- 50 bps of rate cuts in 2026 (June and September)
- “If the next cut is less urgent, aimed at normalisation
rather than addressing an immediate risk, then the leadership will likely want
it to be backed by a stronger consensus than the December cut was. Assembling a
firmer consensus for the next cut will require more convincing progress on
inflation.”
- “Powell is likely to emphasise that the FOMC has just
delivered three cuts that should help to stabilise the labour market and is
well positioned for now while it assesses their impact.”
JP Morgan
- No rate cuts in 2026
- “After three 25 bps risk management rate cuts in the
second half of last year, many FOMC participants have expressed an opinion that
now is a good time to pause.”
- “Powell will indicate that policy is well-positioned to
address risks to either of the Fed’s mandates, and we think he’ll avoid
discussing the various political issues relating to the Fed.”
Wells Fargo
- 50 bps of rate cuts in 2026 (March and June)
- “There is a sound argument that the longer the FOMC waits
to cut, the higher the hurdle becomes to justify on economic grounds the need
to ease further.”
- “We do not expect Chair Powell to hint in the press
conference that further easing is likely to come at the FOMC's next meeting on
March 18 given the range of participants' views and the desire to keep options
open. It is likely that Chair Powell will be asked about the DOJ's
investigation, but we expect him to respond that he has already said what he
has to say on the matter.”
