The Federal Open Market Committee (FOMC) is a branch of the Federal Reserve System responsible for overseeing the nation’s open market operations. This includes making key decisions about interest rates and the growth of the United States money supply. The FOMC meets several times a year to discuss and set monetary policy, aiming to achieve maximum employment, stable prices, and moderate long-term interest rates.
Summary of FOMC Meeting on March 19, 2024
The Federal Open Market Committee (FOMC) met on March 18–19, 2025, alongside the Board of Governors, to review its monetary policy framework. Discussions focused on labor market dynamics, the goal of maximum employment, and the relationship between employment and price stability. Participants supported the broad and evolving concept of maximum employment and considered revising language related to employment shortfalls.
In financial market developments, Treasury yields fell, equity prices decreased, credit spreads widened, and the dollar depreciated. These shifts reflected perceived risks to the U.S. outlook, influenced by weaker consumer data and trade policy uncertainties. Inflation expectations remained anchored despite near-term rises in inflation compensation.
Money market conditions became tighter due to the debt limit situation, though reserves stayed plentiful. This led to discussions about slowing the pace of portfolio runoff to keep reserves steady. The Committee approved all domestic transactions and reported on the ongoing challenges in labor and financial markets, focusing on managing risks to Federal Reserve operations.
Staff Review of the Economic Situation
The Federal Reserve staff review highlighted solid real GDP growth, stable yet elevated consumer price inflation, and steady labor market conditions, with unemployment at 4.1%. Core PCE inflation was 2.8% in February. Consumer and business sentiment turned downbeat, and economic growth abroad showed mixed recovery, though manufacturing in some regions remained weak.
In financial markets, Treasury yields and equity prices fell due to trade policy uncertainty and weaker sentiment. Inflation expectations stayed anchored despite near-term fluctuations. Credit availability was generally stable, though tighter for small businesses and lower-credit-score mortgage borrowers. Delinquency rates improved in some areas but remained elevated in others.
Globally, inflation remained near central bank targets. Foreign central banks varied in policy adjustments, with some easing and others tightening amid trade uncertainty and inflation concerns. U.S. short-term funding markets stayed orderly despite debt limit-related dynamics affecting reserves. Borrowing costs and financing conditions eased overall, benefiting large businesses and high-credit-score borrowers.
Fed’s Staff Economic Outlook
The staff’s economic outlook projected weaker real GDP growth due to lower-than-expected aggregate spending and reduced support from financial conditions. Unemployment was forecast to rise slightly but remain near its natural rate. Inflation expectations were adjusted upward for 2025, reflecting recent higher-than-expected data, but were projected to decline to 2% by 2027.
Uncertainty around the baseline projection had increased, with risks to economic activity and employment tilting downward amid weak spending and sentiment data. However, inflation risks were seen as skewed upward due to persistent core inflation and potential impacts from trade policy changes. Despite challenges, the staff noted uncertainty levels were comparable to those of the past two decades.
FOMC Members’ Views
Participants assessed the economic outlook, noting solid GDP growth, stable labor market conditions, and persistently elevated inflation. However, significant uncertainty about government policies heightened risks to economic growth and employment while pushing inflation risks upwards. Inflation was expected to be influenced by higher tariffs, with participants debating the persistence of these effects. Measures of long-term inflation expectations remained well anchored.
Labor market conditions were broadly balanced, but recent layoffs and hiring pauses linked to policy uncertainty were noted. Business sentiment weakened due to policy uncertainty, particularly in the auto and agricultural sectors, though some optimism was driven by regulatory changes and technological advancements. Financial conditions tightened but remained manageable for creditworthy borrowers.
Amid economic uncertainties, participants decided to maintain the federal funds rate at 4-1/4 to 4-1/2 percent, adopting a cautious, data-dependent approach. They acknowledged risks of inflation persistence and potential tradeoffs between managing inflation and supporting growth and employment. The Committee emphasized its readiness to adjust policies as conditions evolve.
Committee Policy Actions
The Federal Open Market Committee (FOMC) decided to maintain the federal funds rate at 4-1/4 to 4-1/2 percent, citing solid economic growth, stable unemployment, and elevated inflation. Members agreed to slow the pace of securities holdings reduction, reducing the monthly cap on Treasury securities from $25 billion to $5 billion while keeping the cap for agency debt and mortgage-backed securities at $35 billion.
Governor Christopher Waller disagreed, wanting to keep the current pace of securities reduction, as he believed reserve levels were sufficient and money markets showed no signs of stress.
The Committee emphasized its commitment to maximum employment and a 2% inflation target, adopting a cautious, data-driven approach to future policy adjustments. The next meeting is scheduled for May 6–7, 2025.
