Next Fed Meeting: When It Is in March and What To Expect on Interest Rates

The Federal Reserve’s policy committee next meets March 17 and 18, and officials are expected to hold the central bank’s key interest rate steady for the second meeting in a row.

The Federal Open Market Committee (FOMC) will meet to consider cutting the federal funds rate from its current range of 3.5% to 3.75%. The Fed held the rate steady at its January meeting. It lowered it by a quarter of a percentage point at each of the previous three meetings to prevent the recent job market slowdown from turning into a serious increase in unemployment.

Fed officials have mostly entered “wait-and-see” mode to assess how the economy reacts to its recent moves before cutting rates again. Financial markets are pricing in a 97% chance the Fed will hold the fed funds rate steady at its next meeting, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

The fed funds rate influences borrowing costs on short-term loans such as credit cards and car loans, and indirectly affects rates for mortgages and other longer-term credit. Lower interest rates generally encourage spending and boost the economy, while higher interest rates reduce demand and push down inflation.

However, the central bank’s 12-person policy committee is split on the strategy ahead as it pursues its dual mandate to keep inflation low and employment high.

One contingent sees a greater risk of inflation reigniting and favors keeping rates higher for longer to ensure it falls back to the Fed’s 2% annual target. A few Fed members even wanted to signal that a rate increase is in the cards if inflation runs hotter than expected, according to minutes from the most recent Fed meeting.

March Will Be Pivotal

Several participants indicated that they would have supported a two-sided description of the Committee’s future interest rate decisions, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains above the target.

On the opposite end of the debate, at least one Fed official, Stephen Miran, is pushing for the steep rate cuts President Donald Trump has demanded. Last week, Miran said the Fed should make four rate cuts this year (which would lower the rate by a full percentage point) and make them sooner rather than later.

Although inflation is still above the Fed’s 2% annual target, Miran said it was likely to fall. Other Fed officials have said rate cuts will be needed to boost the faltering job market.

Although the possibility of a rate cut is a long shot, March could still be a pivotal month for the Fed, thanks to an impending leadership change as well as ongoing legal pressure from President Donald Trump’s administration.

Drama Behind The Scenes

Time is ticking for the Senate to hold confirmation hearings for Kevin Warsh, President Donald Trump’s nominee to serve as chair of the Federal Reserve. If approved by Congress, Warsh would take the reins at the central bank when Jerome Powell’s term as chair ends in May.

Powell has not said if he will continue as a rank-and-file member of the Fed’s Board of Governors after his chairmanship ends. Powell has been asked about that issue at past press conferences and declined to answer. A further complication could arise if a key Republican senator follows through on threats to block Warsh’s confirmation.

Thom Tillis, a Republican from North Carolina and member of the powerful Senate banking committee, has said he would hold up Warsh’s confirmation unless the administration drops an investigation into renovations at the Federal Reserve’s building.

The probe is aimed at Powell’s statements to the Senate last year about alleged cost overruns in a years-long project to renovate the Fed’s headquarters in Washington. The Fed has reportedly resisted subpoenas from the Justice Department in the investigation, the Wall Street Journal reported.

A further leadership shakeup may be ahead as the Supreme Court considers whether to allow Trump to fire Federal Reserve Governor Lisa Cook. The high court heard oral arguments in the case in January and is expected to rule by June on whether the unprecedented firing can proceed.

Both actions against Fed officials have raised questions about whether the Fed will remain an independent agency free of White House control. Economists say the Fed’s independence is key to its credibility and its ability to manage inflation.