The Federal Reserve (Fed) is expected to leave its rates unchanged in March, in a context of persistent inflation and uncertainties linked to the situation in the Middle East. The quarterly update of the Summary of Economic Projections (SEP) may reflect a more restrictive stance from the Federal Open Market Committee (FOMC): with most members still focused on inflation risks, more policymakers could abandon expectations of a rate cut this year.
Our expectations:
- The FOMC will leave the target range for the federal funds rate at 3.50%–3.75%. Two dissents are expected (Stephen Miran and Christopher Waller) in favor of a 25‑basis‑point cut. Michelle Bowman may also support this position, given the job losses recorded in February according to the Bureau of Labor Statistics (BLS).
- The statement should highlight strong growth and still‑high inflation, while emphasizing increased macroeconomic uncertainty, notably after the Supreme Court’s overturning of reciprocal tariffs and amid an energy shock linked to the conflict in Iran. The Fed will also note that weak job creation and a slight uptick in unemployment point to a still‑fragile stabilization of the labor market.
- The SEP is expected to remain solid, with growth above 2% this year, though slightly revised downward from December’s 2.3% due to the effects of the current geopolitical context. Meanwhile, inflation projections for 2026 are expected to be revised upward, for both the headline index and the core index, above the 2.4% and 2.5% published in December. This revision reflects stronger inflationary pressures related to energy and a persistently firm core PCE of around 3%. As for the labor market, no major revision is expected, with the unemployment rate remaining around 4.4%–4.5% in 2026.
In this context, as several Fed members place greater emphasis on inflation risks, the projections would suggest higher interest rates for longer. The median expected rate for 2026, stable at 3.4% since September, would no longer include a rate cut, since only three changes in individual projections would be enough to shift the median. As for the long‑term equilibrium rate, estimated at 3.0%, it could be slightly revised upward amid stronger productivity gains.
Moreover, the central bank will continue the purchases associated with reserve‑management operations (RMP), initiated at the end of 2025.
In summary:
Jerome Powell is expected to reaffirm a cautious, data‑driven monetary policy, emphasizing the strength of the economic cycle and a return of inflation to its target only from 2028 onward. He will stress that any easing will require clear evidence of a lasting decline in inflation toward 2%, while remaining ready to respond in the event of labor‑market deterioration. Finally, despite the current energy shock, the Federal Reserve is expected to tolerate temporary price pressures: cost increases linked to supply shocks, typically transitory, do not justify a monetary response as long as inflation expectations remain well anchored.
Completed 16/03/2026. This commentary is provided for information purposes only. The opinions expressed by Crédit Mutuel Asset Management are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. Crédit Mutuel Asset Management: 128 Boulevard Raspail, 75006 Paris is an asset management company approved by the Autorité des marchés financiers under n° GP 97 138 and registered with ORIAS (
www.orias.fr) under no. 25003045 since 11/04/2025. Public Limited Company (Société Anonyme) with share capital of €3,871,680, RCS Paris n° 388 555 021, Crédit Mutuel Asset Management is a subsidiary of Groupe La Française, the asset management holding company of Crédit Mutuel Alliance Fédérale.
