Fed holds rates steady
The Federal Reserve left its policy rate unchanged at 3.5–3.75% and signalled just one cut in 2026, stressing uncertainty from the Iran war and economic data — traders now see a lower chance of rate cuts this year. That macro pause increases the premium on scenario modelling and cost‑sensitive planning for large engineering investments. (finance.yahoo.com)
March 17–18 FOMC materials released March 18 showed the median year‑end fed‑funds projection at 3.4% and the distribution of individual “dots” shifted toward fewer reductions versus December. (federalreserve.gov) The Summary of Economic Projections raised the Fed’s 2026 PCE inflation forecast to 2.7% and lifted its 2026 real GDP projection to about 2.4%, while the median unemployment path remained near 4.4%. (federalreserve.gov) Market‑implied pricing tightened sharply: Investing.com showed ~99.6% probability of a hold at the meeting, and futures trackers have shifted expected cuts later into 2026–2027 as traders repriced risk. (investing.com) Chair Powell told reporters it was “too soon to know” the economic effects of the Middle East conflict and warned that recent oil moves “can cause trouble for inflation expectations,” language the FOMC cited when noting elevated uncertainty. (cnbc.com) Benchmark yields and credit costs remain high for capital projects: the Fed H.15 table showed the 10‑year Treasury around 4.15% on March 18, 2026, and the ICE BofA BBB corporate index yield was roughly 5.3% earlier this month. (federalreserve.gov) A concrete example: using standard NPV formulas, a five‑year project with $20m annual cash flows sees NPV fall from about $8.77m to $8.10m when the discount rate rises from 4.15% to 4.40% (a 25‑bp move), a roughly 7.6% NPV reduction. (corporatefinanceinstitute.com) Given the Fed repricing and SEP shifts, scenario sets that sweep discount rates in 25‑bp increments across a ±25–100‑bp band map directly to market moves and capture materially different NPVs and financing costs seen since early March 2026. (bloomberg.com)
