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Fed meeting in focus: Benchmark rate likely to be kept unchanged
The Federal Reserve will hold its monthly meeting today, March 19, to discuss monetary policy and interest rates, with expectations leaning towards keeping rates unchanged within the range of 4.25% - 4.50%, amid ongoing inflationary pressures and concerns over economic slowdown.
The Fed will announce its decision on interest rates and its quarterly economic projections today at 2:00 PM Washington time (9:00 pm KSA time), followed by a press conference by Chair Jerome Powell, where he will provide insights into future monetary policy.
Analysts told Argaam that the meeting comes amid economic uncertainty, with markets currently ruling out any rate cuts. However, investors will closely monitor Powell's statements regarding the future of monetary policy, particularly in terms of quantitative tightening and growth projections.
US Economic Outlook: Between Slowdown and Persistent Inflation
Wael Makarem, Senior Market Strategist for MENA Region at Exness, said that the US Fed is expected to keep interest rates unchanged during today’s meeting. This decision is supported by a decline in core inflation to 3.1%—the lowest since 2021—along with a stable unemployment rate of 4.1% and moderate GDP growth projections.
He noted that markets anticipate rate cuts in 2025, with two to three reductions of 25 basis points each. However, the March meeting is unlikely to mark the beginning of these cuts.
Raed Momani, Head of Asset Management at Capital Investments
Makarem also pointed out that Powell’s recent testimony before Congress reinforced this outlook, as he emphasized that the Fed would not lower rates until there is a tangible improvement in economic data.
Future Trends and the Impact of Quantitative Tightening
Raed Momani, Head of Asset Management at Capital Investments, said that the US central bank will focus on three key factors: economic growth forecasts, inflation levels, and future interest rate trends.
He added that there are signs of downward revisions in growth forecasts and upward adjustments in inflation estimates, which could push the Fed to adopt a more cautious approach.
Momani further highlighted that the current scenario suggests the Fed may face challenges related to stagflation, where economic growth slows while inflation remains high. He noted that markets will also pay close attention to issues such as tariffs and immigration policies, which could influence the Fed’s future outlook.
The Fed might hint at slowing the pace of bond sales, which could ease monetary tightening and impact the yield curve. While the Fed controls short-term interest rates, long-term yields are driven by market forces. If the Fed slows the pace of bond sales, it could provide support to financial markets and reduce pressure on economic growth, Momani added.
For his part, Momani said that economic data is reflecting mixed signals, as some hard data, such as jobs and retail sales, continue to show relative strength in the economy, while other soft data, such as consumer confidence and business expectations, reflect growing concerns about an economic slowdown.
The Fed will focus particularly on survey data, as they provide early indicators of the future economic path, thus increasing uncertainty about its future direction, he added.
Implications of Fed Decisions: How Will Markets and Commodities React?
Makarem said that financial markets may respond modestly to the expected Fed decision. However, any unforeseen turn of events such as an interest rate cut could result in sharp volatility.This could push stocks higher, put further pressure on the US dollar, and elevate gold prices to new record peaks.
He added that future guidance will be the decisive factor, as any signals from Powell toward a more accommodative monetary policy will support stocks and gold prices. On the other hand, any hawkish tone could trigger a stronger US dollar and encumber financial markets.
In the same vein, Momani emphasized that gold may continue to rise amid increased demand from global central banks, especially in emerging markets such as China, along with heightened geopolitical uncertainty.
Historically, gold prices have exhibited an inverse correlation with real bond yields, with higher yields leading to lower demand for gold and vice versa. Robust demand from China and global central banks could support bullion’s continued rise despite the strength of the US dollar, he further stated.
Momani also pointed out that any decline in gold prices could present a buying opportunity, particularly with the ongoing global trade and political tensions, which strengthens gold's safe-haven bid.
Previous Fed Meetings: What Was Their Influence on Global Markets?
Momani explained that the Fed’s March 2025 meeting differs from previous ones, as the US central bank seems more focused on both inflation and growth risks, which could fuel changes in financial market trends.
The Fed's decisions, according to the research head, do not only impact on the US economy, but they also extend to global markets, especially emerging markets, which may be affected by changes in capital flows and exchange rate fluctuations.
He pointed out that global financial markets are cautiously anticipating the Fed’s March meeting. This is because US stock indices posted mixed performance in the previous days, while bond yields remained at relatively high levels, reflecting uncertainty about the Fed's upcoming decisions.
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