Federal Open Market Committee March Meeting – Fed Funds Target Unchanged


The Federal Reserve’s monetary policy setting committee, the Federal Open Market Committee (FOMC), concluded the March meeting and in her post-meeting press conference Chair Janet Yellen announced no change in the target range for the federal funds rate. A second increase in March, following the initial increase in December, was widely expected by analysts after the December meeting, but expectations quickly changed in light of weak economic data that accumulated in the first quarter.

The statement released following the meeting emphasized continuing progress is US economic conditions but concerns about risks posed by global economic and financial developments in recent months. The summary of economic projections released with the statement indicated what Yellen characterized as only slightly weaker expectations than at the December meeting. The median forecast for GDP growth was slightly lower in 2016 and 2017 but unchanged thereafter. Headline inflation was lower in 2016 while core inflation was unchanged, pointing to a continuing influence of declining energy prices, an impact expected to be transitory.

The median path for the federal funds rate was 0.5 percentage point lower in 2016 and 2017, and 0.25 percentage point lower in 2018 and over the longer run. Yellen emphasized that the expectations regarding the path of the federal funds rate represented the views of individual meeting participants, consistent with their own views about the trajectory of the economy and appropriate monetary policy, and not a consensus forecast nor a preset roadmap for rate increases. The pace of interest rate normalization will be data dependent and consistent with unfolding economic conditions, both domestic and global, to the extent that global developments affect the domestic economy.

Yellen characterized the decision to maintain the current federal funds target as based on prudence given the uncertainty surrounding the impact of recent economic developments, adding that meeting participants expect the recent turbulence to subside, economic conditions to stabilize, supporting ongoing improvements that would justify additional steps on the path to normalization. She consistently resisted the question of when, offering only that every meeting including the upcoming April meeting is a live possibility.


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