U.S. Federal Reserve Holds Interest Rate at 4.5% in March Meeting

The March FOMC announcement just happened, and as expected, the benchmark interest rate stayed put at 4.5%.

Trump’s been pushing hard for a U.S. rate cut, but the market saw this freeze coming a mile away. (Looks like the whole Trump vs. Fed standoff has settled down for now.)

The Chicago Mercantile Exchange’s FedWatch tool predicted a 99% chance of rates staying the same, and sure enough, that’s exactly what happened.

**What’s the FedWatch thing anyway?**

It’s a tool from the Chicago Mercantile Exchange that guesses when and how much the Federal Reserve might tweak rates—whether they’ll hike, hold, or cut them. Investors use it to get a feel for what the market’s expecting from the Fed’s next move.

Seems like this data played a big role this time around.

There wasn’t any direct mention of Trump’s tariff policies, but the statement dropped a new phrase—“rising uncertainty”—and that’s got people talking. Right after, the Nasdaq bounced back.

That “uncertainty” word? It’s the first time it’s shown up in an FOMC statement.

Here’s the deal: if employment stabilizes and inflation starts creeping up, rates would normally have to rise to keep inflation in check (that’s the whole point of rate hikes, right?).

But by throwing in “increasing economic uncertainty” for the first time, they’re hinting that even with jobs and prices in the mix, they might not raise rates—or could even cut them. The market took it as good news and ran with it.

The economic growth rate is 1.7%

(Down significantly from the previous 2.1%)

The U.S. economic growth rate was projected at 2.1% back in the December 2024 announcement, but in the March 2025 update, they slashed it down to 1.7%.

Looks like the ghost of stagflation is still lurking around.

What’s stagflation, anyway?

It’s this nasty combo where the economy’s stuck in a rut (stagnation) while prices keep climbing (inflation). Usually, it’s when growth is sluggish or even negative, but inflation’s still going up.

You might see it hit alongside a shaky job market. Stagflation’s a real headache for policymakers—central banks and governments struggle to tame rising prices and boost the economy at the same time. (Worst case? Your wallet’s getting thinner while everything gets pricier.)

Upcoming FOMC Schedule
Announcement on May 7th

The U.S. holds a total of 8 FOMC meetings each year to decide on the benchmark interest rate.

January and March are already done, and the next one’s lined up for May 6th to 7th, with the announcement dropping on the 7th.

But guess what? The market’s betting that the May FOMC will keep the rates frozen again.

The U.S. FOMC Dot Plot Released Last Year (Each dot represents the opinion of one committee

Looking at the U.S. FOMC dot plot released last year, the forecast for 2024 is a current interest rate of 4.5%, and the final rate for 2025 is expected to be around 4%.

In other words, out of the 8 meetings in 2025, a maximum of 2 rate cuts (25 basis points each) are expected.

Looking at the dot plot released this time, the final interest rate for 2025 remains unchanged at 4%, while the outlook for 2026 has narrowed to 3.5%.

Of course, the dot plot doesn’t mean the interest rate will be decided exactly as shown, since it includes not only the 12 voting members (VOTERS) who have decision-making authority, but also the Federal Reserve presidents who attend the meetings. However, since it reflects the consensus of the committee members' views, the rate typically follows the dot plot closely.

Increased inflation concerns due to the trade war.

Especially with the tariff war initiated by the U.S. now fully underway, it's clear that inflation concerns are reigniting.

The U.S. has imposed an additional 10% tariff on China and a 25% tariff on Canada and Mexico, prompting retaliation from these countries, with Canada already launching aggressive countermeasures.

Raising tariffs will naturally lead to an increase in consumer prices.

Moreover, energy prices affect the rise of all other prices.

Higher manufacturing costs + increased logistics costs = higher product prices.

We’ll need to keep an eye on the May FOMC schedule, but if the U.S. gives any indication that it may not hold rates steady but instead raise them, the market will likely be engulfed in shock and panic.

For reference, FEDWATCH predicts that the U.S. interest rate will remain unchanged in May as well, with an 80.5% probability.

Looking at the FOMC March dot plot and the current situation (inflation increase due to the trade war), it seems that keeping the interest rate unchanged was the inevitable step.

One concern, however, is that while interest rates are high, the economy is in a downturn, and I can only pray that we don't face the worst-case stagflation.