The Federal Reserve left the federal funds rate unchanged at a target range of 3.5%–3.75% for a second consecutive meeting in March 2026, in line with market expectations. Policymakers noted that economic activity continues to expand at a solid pace, job gains remain subdued, and inflation is still somewhat elevated. They also stressed that the economic implications of the war with Iran are highly uncertain.
In this context, officials maintained their outlook for monetary policy, still projecting one reduction in the federal funds rate in 2026 and another in 2027, consistent with the December projections, though the exact timing of these cuts remains unclear.
The Fed revised its growth forecasts modestly higher. Real GDP is now expected to increase by 2.4% in 2026 (up from 2.3% in December) and by 2.3% in 2027 (up from 2.0%). The unemployment rate forecast for 2026 is unchanged at 4.4%, while the 2027 projection has been raised slightly to 4.3% from 4.2%.
Inflation projections were also adjusted upward. Both headline PCE and core PCE inflation are now expected to reach 2.7% in 2026, compared with December’s forecasts of 2.4% and 2.5%, respectively. For 2027, both measures are projected at 2.2%, up from 2.1% in the prior forecast.
