To The Moon

As the Federal Open Market Committee (FOMC) convenes for its two-day policy meeting on March 18-19, 2025, all eyes are on the Federal Reserve’s next move. With the interest rate decision and accompanying statements set to drop on March 19, investors, analysts, and policymakers are parsing the latest data for clues. Here’s what we know as of March 17, 2025, about the meeting, the expectations, and what a surprise could mean for markets.

The Latest on the Fed’s March Meeting

The FOMC meeting is underway, but no official hints have leaked yet—it’s business as usual for now. Fed Chair Jerome Powell and other officials have kept their cards close, stressing a cautious stance in recent weeks. With a strong economy, a robust labor market, and inflation still hovering above the Fed’s 2% target, the central bank isn’t signaling any dramatic shifts. This week’s decision will hinge on fresh economic projections and Powell’s tone during the post-meeting press conference.

The Backdrop: Key Data Points

Recent economic indicators paint a mixed but stable picture. Inflation, per the Consumer Price Index (CPI) for February, ticked up slightly, driven by shelter costs, though tempered by cheaper airline fares. The Fed’s preferred metric, the Personal Consumption Expenditures (PCE) price index, stood at 2.8% annualized in November 2024—down from 3.4% a year prior but still above target. On the jobs front, February added 151,000 positions, surpassing the 80,000-100,000 monthly pace Fed Governor Christopher Waller calls healthy, though signs of softening persist.

The Fed’s 2024 rate cuts—totaling 1% across three moves (0.5% in September, 0.25% in November, and 0.25% in December)—brought the federal funds rate to 4.25%-4.5%. January 2025 saw a pause, with the Fed projecting just two cuts for the year ahead, down from an earlier four. Looming over all this is the Trump administration’s tariff proposals—25% on Mexican and Canadian goods starting April 2 and doubled tariffs on China—stoking fears of renewed inflation pressures.

What’s the Market Expecting?

The consensus is clear: the Fed will likely hold rates steady at 4.25%-4.5%. The CME FedWatch Tool pegs the odds of no change at 97%, with a rate cut not hitting 50% probability until June 2025. Powell’s recent remarks reinforce this, suggesting the Fed can afford to stay restrictive if the economy holds up and inflation doesn’t budge toward 2%. The updated Summary of Economic Projections (SEP), due Wednesday, will offer a window into the Fed’s 2025 thinking, but December’s forecast of two cuts sets the baseline.

Social media chatter on X mirrors this view. Users anticipate a “wait-and-see” approach, especially with tariff uncertainty clouding the horizon. Some predict a modest market bounce pre-announcement, but few expect fireworks unless Powell drops a bombshell.

Will Rates Be Cut?

A rate cut this week seems off the table. The data—solid growth, a 4.1% unemployment rate, and sticky inflation—doesn’t scream urgency. Tariffs could push prices higher, but their effects won’t fully materialize for months, giving the Fed breathing room. Only a sharp downturn in jobs or a sudden inflation drop would justify easing now, and neither is in sight.

What If the Fed Surprises?

If the Fed defies expectations with, say, a 0.25% cut, markets would feel the jolt:

• Stocks: Equities could surge short-term, with lower borrowing costs lifting growth sectors like tech. The S&P 500 and Nasdaq might lead the charge, though tariff worries could cap gains.

• Bonds: Treasury yields, like the 10-year, would likely fall as bond prices climb—a pattern seen after 2024’s cuts when yields dropped from 4.55% in January 2025.

• Dollar and Commodities: A weaker U.S. dollar could boost gold, already at record highs amid tariff jitters, and other commodities.

• Volatility: An unexpected cut might spark confusion—supportive if seen as proactive, but destabilizing if interpreted as a distress signal, especially after recent $6 trillion stock losses tied to tariff news.

On the flip side, a hawkish hold—fewer projected cuts due to tariff-driven inflation—could pressure stocks, lift yields, and drive safe-haven flows into gold.

S&P 500

The Bottom Line

The smart money’s on a steady hand from the Fed this week. With 2.8% GDP growth in 2024, a resilient jobs market, and inflation in a holding pattern, there’s little case for immediate action. Tariffs add a wild card, but their impact is months away. Wednesday’s SEP and Powell’s press conference will be the real market movers—watch for shifts in inflation forecasts or rate-cut timing. A hint of a May or June cut could nudge markets up; a reaffirmed pause might keep them flat.

What do you think—will the Fed stick to the script, or are we in for a curveball?

@TigerWire