Fed Expects One Rate Cut, PCE Inflation at 2.7%

FOMC Meeting Highlights March 2026: The Fed held interest rates steady, but still expects one rate cut this year. The officials also submitted their projections for gross domestic product (GDP) growth, unemployment rate, and PCE inflation amid elevated oil prices.

FOMC Meeting Highlights: Fed Kept Interest Rates Unchanged

The Federal Open Market Committee (FOMC) members decided to hold US interest rates steady within the 3.5% to 3.75% target range, in line with market expectations.

Fed officials noted that economic activity continues to expand at a solid pace, with job gains remaining low and inflation rising due to elevated oil prices. The economic outlook is uncertain amid no signs of the US and Israel’s exit from the Iran war.

Fed Chair Jerome Powell said that shocks resulting from surging oil prices could certainly weigh down the U.S. economy. Jerome Powell noted near-term inflation rising, but turned down fears of stagflation. “The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation,” he added.

One of the key highlights from the FOMC Meeting is that the Fed still expects one rate cut this year and another in 2027. Notably, the CME FedWatch Tool shows no rate cut in 2026, with the next cut not expected until mid-2027.

Powell claims the Fed is balancing two goals in a situation where the risks to the labor market are to the downside, which would call for lower rates. Also, the risks to inflation are to the upside, which would call for a Fed rate hike or no rate cut until inflation cools.

US PCE Inflation Revised Higher to 2.7%

FOMC officials projected Personal Consumption Expenditures (PCE) and Core PCE inflation, the Fed’s preferred inflation gauge, to rise higher at 2.7%. Earlier FOMC meeting estimates highlighted inflation of around 2.4%-2.5%.

The FOMC Meeting also indicated that headline Personal Consumption Expenditures is expected to be hot in early 2027 amid rising oil prices. WTI crude oil futures climbed 1% to $97.25 per barrel today, whereas Brent crude oil futures jumped 5.25% to $112.70 per barrel.

10x Research’s regression model indicated that elevated oil prices will push US CPI inflation from 2.43% to almost 3.4%. Notably, the February PPI inflation came in higher than expected at 3.4%. Also, Core PPI rose to 3.9%, its highest level since February 2023.

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