Federal Reserve — FOMC Statement (USA, 2026)

FOMC Minutes of the Federal Open Market Committee March 17 18, 2026 F E D E R A L R E S E R V E S Y S T E M Minutes of the Federal Open Market Committee March 17 18, 2026 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, March 17, 2026, at 10:30 a.m. and continued on Wednesday, March 18, 2026, at 9:00 a.m.1 Developments in Financial Markets and Open Market Operations The manager turned first to an overview of broad market developments during the intermeeting period. Earlier in the period, concerns about artificial intelligence (AI) disruptions to certain business models led to declines in policy rate expectations and interest rates and weighed on equity prices. The conflict in the Middle East which started later in the period resulted in sharp increases in energy prices, raised questions about the macroeconomic outlook, and caused a notable repricing in several asset classes. Respondents to the Open Market Desk Survey of Market Expectations (Desk survey) viewed the U.S. macroeconomic outlook as little changed, apart from an increase in near-term inflation projections; the manager noted, however, that survey responses came in the early days of the conflict. The manager observed that front-month futures prices for crude oil increased about 50 percent over the period. The significantly smaller rise of the longer-dated futures prices compared with the front- end futures, however, could have indicated expectations that most of the recent increase in oil prices will be relatively short lived. Other market prices were consistent with this interpretation. For example, the one-year inflation swap rate rose nearly 50 basis points over the period, but forward measures of inflation compensation at horizons beyond one year were little changed. The manager then turned to policy rate expectations. The near-term federal funds rate path implied by futures prices shifted higher, on net, over the period, with a rate cut not fully priced in until December. The modal path based on options prices also shifted higher and was consistent with no rate change this year, compared with one 25 basis point cut previously. The distribution of federal funds rate outcomes early next year implied by options prices shifted notably to higher values and became more 1 The Federal Open Market Committee is referenced as the  FOMC  and the  Committee  in these minutes; the Board of Governors of the Federal Reserve System is referenced as the  Board  in these minutes. 2 March 17 18, 2026 dispersed; as a result, the probability of rate hikes through that period increased to about 30 percent. By contrast, the median of the modal paths reported in the Desk survey continued to show two 25 basis point rate cuts this year, although survey respondents pushed out the timing of those cuts slightly compared with their previous expectations. The manager noted, however, that market intelligence suggested that some survey respondents appeared to have shifted their expectations in the direction of fewer rate cuts in the days after the survey was conducted. Treasury yields ended the intermeeting period higher, on net, more so at the short end. Changes in term premiums appeared to account for a substantial fraction of the changes in yields, likely reflecting factors such as the greater general uncertainty induced by the conflict in the Middle East and shifts in investor positioning. Treasury market liquidity diminished a bit over the period, in line with the increase in yield volatility, but the Treasury market continued to function well. Broad equity prices fell about 5 percent over the period. The software sector underperformed the broader market again over the intermeeting period, as AI-related concerns weighed especially heavily on the sector. The same concerns were also evident in segments of the credit market. Leveraged loan prices for software firms declined sharply over the period, whereas prices in other sectors were more stable. There were also notable increases in redemption requests at several private credit funds that offer investors limited liquidity through quarterly redemption opportunities. The manager noted that the staff will continue to monitor the situation closely. The manager then discussed international developments. Foreign equities outperformed U.S. equities in 2025 and in early 2026, but their prices had declined more than those of U.S. equities since the start of the conflict in the Middle East. The exchange value of the dollar had experienced sharp swings over the previous several weeks but was roughly unchanged, on net, year to date. Sentiment toward the dollar appeared to have become more positive in the last several days of the intermeeting period, buoyed by the dollar s traditional safe-haven status and the U.S. s position as a net energy exporter. With elevated energy prices causing global inflationary pressures, several central banks previously expected by market participants to either remain on hold or ease policy further including the European Central Bank, the Bank of Canada, and the Swiss National Bank were now expected to hike rates modestly this year. The manager observed that money market conditions had remained broadly stable amid ongoing reserve management purchases (RMPs). Over the intermeeting period, the effective federal funds rate remained unchanged at 1 basis point below the interest on reserve balances (IORB) rate, and rates on repurchase agreements (repo) remained generally near the IORB rate. Overnight reverse repo operations saw minimal usage except at month-ends, and standing repo operations were used on only a couple of days, which were days with relatively high volumes of Treasury securities settlements. Minutes of the Federal Open Market Committee 3 On one of those days, standing repo usage reached $30 billion, the third-largest volume since the inception of the standing operations. The manager saw this development, together with interdealer repo rates being not much above the standing repo rate that day, as suggesting a greater willingness of at least some counterparties to use the operations when economically sensible following the changes to standing repo operations implemented in December. The manager assessed that money market conditions as well as various indicators of reserve conditions were consistent with reserves remaining within the ample range. Finally, the manager discussed the expected trajectory of key components of the Federal Reserve s balance sheet. System Open Market Account (SOMA) holdings were expected to continue to grow with RMPs. In April, tax payments were expected to cause wide swings in the Treasury General Account and reserves. Reserves were expected to hit their trough in late April, at which point they would be about equal to the level that had prevailed at the end of last year. After April, reserves were projected to average about $3 trillion through September. The manager noted that, after April, the monthly pace of RMPs was likely to be reduced significantly as swings in nonreserve liabilities were expected to moderate; the adjustment was likely to be somewhat gradual. By unanimous vote, the Committee ratified the Desk s domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System s account during the intermeeting period. Staff Review of the Economic Situation The information available at the time of the meeting indicated that real gross domestic product (GDP) continued to expand at a solid pace, particularly after accounting for the effects of the federal government shutdown in the fourth quarter of last year. The unemployment rate was little changed in recent months, though job gains continued to be low. Consumer price inflation remained elevated. Total consumer price inflation as measured by the 12-month change in the personal consumption expenditures (PCE) price index was 2.8 percent in January. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was 3.1 percent in January. Both total and core inflation measures were about   percentage point higher than their levels a year earlier. Core goods price inflation had picked up over that period, a development that the staff largely attributed to the effects of higher tariffs. Core services price inflation had declined relative to a year earlier, led by a slowing in housing services price inflation, while core nonhousing services price inflation was little changed. Based on data from the consumer price index and the producer price index, the staff estimated that total PCE price inflation was 2.8 percent in February, while core PCE price inflation was 3.0 percent. 4 March 17 18, 2026 The unemployment rate was 4.4 percent in February, the same as its level in September of 2025. The average monthly change in total payroll employment was low over January and February. The effects of a strike in the health-care sector and unusually harsh winter weather weighed on payrolls in February, but those effects were expected to unwind in March. The employment cost index increased 3.4 percent over the 12 months ending in December, and average hourly earnings rose 3.8 percent over the 12 months ending in February; both measures were slightly below their year-earlier levels. Real GDP growth was solid last year, although it was held down in the fourth quarter by the effects of the federal government shutdown. Available indicators suggested that real GDP growth had picked up in the first quarter of this year,