Fed interest rate decision: Will the interest rate remain unchanged amid economic instability?

FOMC) will announce its latest policy decision on March 19, with the market almost certain that the Federal Reserve will keep interest rates unchanged. According to CME's FedWatch tool, there is a 99% chance that the Fed will maintain the current interest rate, citing persistent inflation and economic uncertainty. The key factors behind the Fed's decision Policy makers are facing the challenge of balancing economic growth and inflation control, especially with the political and financial uncertainties engulfing the US economy. A major concern is the 'Trump instability', as policy changes or political uncertainties surrounding former President Trump could impact economic confidence and investor sentiment. The stock market has dropped to its lowest level in six months, with investor confidence shaken by tariffs, slowing economic growth, and mixed economic data. The upcoming retail sales data for February to be announced on Monday will provide further details on consumer spending, an important factor in assessing economic momentum. Market expectation: There will be no interest rate cut in March. Investors are currently expecting the Fed to cut interest rates three times in 2025, starting from June. However, with inflation still higher than the Fed's 2% target and global supply chain pressures pushing up prices, the Fed may find it difficult to loosen monetary policy early. One of the most anticipated aspects of this meeting will be the announcement of the Economic Projections Summary (SEP), including dot plot — a visual representation of the interest rate path that Fed officials see in the years ahead. Investors will also closely analyze Fed Chair Jerome Powell's press conference for clues on the central bank's stance on future interest rate adjustments. Fed's cautious approach: 'Patience' in policy actions The last time the Fed updated its dot plot in December, officials predicted that the federal funds rate would end 2025 at between 3.75% and 4%, implying two rate cuts this year, less than market expectations. Michael Gapen, the chief U.S. economist at Morgan Stanley, expects Powell to emphasize patience, citing ongoing financial and economic uncertainties. While the economy remains robust, Powell may underscore the Fed's cautious approach to premature interest rate cuts, as the risk of inflation resurgence looms. Will there be three interest rate cuts in 2025? Short-term future market indicates that interest rate cuts may begin in June, with the possibility of a total of three cuts by the end of the year. However, recent data has cast uncertainty on the third cut, especially in December. Slowing growth and declining consumer confidence suggest the Fed may need to cut interest rates. High inflation expectations could force the Fed to keep interest rates high for longer. The Federal Reserve has announced it will adjust its policies if unemployment rises significantly, but currently, the focus is still on controlling inflation. What's next? The Fed is expected to keep interest rates unchanged at 4.25%-4.50% next week, with no possibility of a rate cut in May. Investors will closely analyze the Fed's updated forecasts on inflation, unemployment, and economic growth, which will be announced on March 18th. With prolonged inflation pressure and global trade and political uncertainties in the United States, the Fed's stance remains cautious. While the market still predicts multiple interest rate cuts this year, the timing and scale of those cuts will depend on inflation trends, labor market conditions, and economic growth in the coming months.