March FOMC Interest Rate Meeting

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At 2:00 AM Beijing time on March 19, the Federal Open Market Committee (FOMC) will announce its March interest rate decision.Following that, Federal Reserve Chairman Powell will hold a monetary policy press conference at 2:30 AM.This time, market sentiment is more complex than ever.

Hanging over the decision-making process are the dark clouds of the Middle East situation. Oil prices are showing signs of volatility in the Strait of Hormuz, and 'stagflation,' a term dreaded by central bankers, is quietly becoming a hot topic on Wall Street.

The Federal Reserve stands precariously between rebounding inflation and cooling employment: the year-on-year increase in the core PCE price index has widened to 3.1%, while non-farm payrolls have unexpectedly contracted.

Under this dual pressure, the Federal Reserve has almost no room or courage to act.According to CME FedWatch data, the probability of maintaining the current interest rate in this meeting exceeds 99%.Mainstream institutions such as Danske Bank, Goldman Sachs, and Barclays unanimously expect the Federal Reserve to remain on hold and have pushed back their expectations for the first rate cut from June to September or even later.

Facing the volatility brought by the situation in Iran, officials have reached a rare consensus.Both hawks and doves have clearly stated that it is too early to judge the impact of the war. Kashkari, Williams, Waller, and Daly successively expressed their views before the blackout period:The transmission effect of energy prices on the economy still needs to be observed; rash policy adjustments may backfire. This cross-factional agreement suggests that this meeting is unlikely to send strong policy signals.Powell is expected to emphasize the 'two-way risks' of the energy shock at the press conference: it could either push up inflation or suppress growth.

Therefore, the most crucial focus of this interest rate decision meeting will shift to the dot plot, which reveals the interest rate path and outlines officials’ true expectations for rate cuts within the year.Will the number of rate cuts predicted for this year decrease from four last year to two, one, or even zero? How large will the revisions to GDP growth and inflation be in the dot plot? These numbers will directly answer:How much policy space does the Fed actually have under the shadow of stagflation?

Danske Bank predicts that the Fed may still carry out two rate cuts in June and September, provided that uncertainties in the energy market gradually ease. If the conflict lasts longer than expected, the timing of the rate cuts may be delayed, but the likelihood of completely canceling them remains slim. This expectation will also be reflected in the dot plot released this time — institutions expect a slight downward revision to the 2026 GDP growth forecast and a slight upward adjustment to the inflation forecast.

When the inflation target seems unattainable, the job market unexpectedly stalls, and geopolitical conflicts continue to escalate, can the Fed win this 'stagflation battle' without triggering a recession? If persistently high oil prices force the Fed to close the rate cut window this year, will the valuation logic of growth stocks be repriced?More importantly, how will Powell define the current situation — reiterating the familiar phrase 'data-dependent,' or offering reassurance regarding recent market volatility?

Fellow investors, welcome to make an appointment to watch!

At midnight on March 19, fasten your seatbelts as we witness this together.

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