- The Federal Reserve is likely to keep interest rates unchanged for the second consecutive meeting
- The updated Summary of Economic Projections may provide insights into the policy outlook
- The US Dollar could strengthen if the Fed minimizes concerns about economic growth.
The US Federal Reserve (Fed) is set to announce its monetary policy decision and release the updated Summary of Economic Projections (SEP), including the dot plot, following its March meeting on Wednesday. Market expectations suggest the central bank will keep policy settings unchanged for a second consecutive meeting after lowering interest rates by 25 basis points (bps) to the 4.25%-4.5% range in December.
According to the CME FedWatch Tool, investors see almost no chance of a rate cut in March and assign a 30% probability to a 25 bps reduction in May. As a result, the US Dollar’s movement is likely to be influenced more by the Fed’s revised projections and Chairman Jerome Powell’s commentary than the rate decision itself.
In December, policymakers projected a total 50 bps rate cut for 2025, an annual GDP growth of 2.1%, and PCE inflation at 2.5% by year-end. Analysts at TD Securities anticipate the Fed will maintain its current stance, with Chair Powell reinforcing a patient approach to policy adjustments. They also expect minimal changes to the SEP or quantitative tightening (QT) plans, given the resilience of the labor market and persistent inflation pressures.
The US Federal Reserve (Fed) is set to announce its interest rate decision and release the updated Summary of Economic Projections (SEP) on Wednesday at 18:00 GMT, followed by Fed Chairman Jerome Powell’s press conference at 18:30 GMT.
Recent weak US macroeconomic data and President Donald Trump’s tariff policies have heightened concerns over a potential recession, with the Federal Reserve Bank of Atlanta’s GDPNow model forecasting a 2.4% annualized contraction for the first quarter.
If the Fed’s dot plot projects a 75 basis points (bps) rate cut in 2025, it would signal a dovish stance, likely triggering a USD selloff. Conversely, a more hawkish SEP, with projections for only a single 25 bps cut, could strengthen the USD. If projections remain unchanged, market focus will shift to growth and inflation forecasts—downward growth revisions could weaken the USD, while higher inflation estimates with stable GDP projections could support the currency.
Powell’s remarks will also influence market sentiment. If he downplays recession risks and highlights inflation uncertainty, particularly due to Trump’s tariff policies, the USD could gain traction. However, if he acknowledges a deteriorating growth outlook, the USD may struggle to find demand.
Eren Sengezer, European Session Lead Analyst at FXStreet, notes that EUR/USD remains technically bullish, trading in the upper half of a two-month ascending regression channel, with the Relative Strength Index (RSI) holding near 70.
Key resistance levels stand at 1.1000, followed by 1.1100 and 1.1180, while support levels are seen at 1.0770 (mid-channel) and 1.0720 (200-day SMA). A daily close below 1.0720 could invite further selling, potentially pushing EUR/USD toward 1.0645 (20-day SMA).
