Fed pauses on rates
The Federal Reserve held the fed funds rate at 3.50–3.75% after its March meeting, citing mixed inflation and labor data and calling the stance a period of “strategic paralysis.” Markets and economists still expect at most one cut later in 2026, but the Fed’s pause pushes meaningful easing farther out amid geopolitical risk. (reuters.com)
The Fed’s March Summary of Economic Projections shows a median year‑end 2026 federal‑funds rate of 3.4%, a projection that implies one modest downshift in the committee’s median path for 2026. (federalreserve.gov) Reuters’ March 20–25 poll found 61 of 82 economists expected no policy change next quarter and 55 of 82 saw no reductions until at least September, signaling professional forecasters pushed expected cut timing well into the back half of 2026. (money.usnews.com) Market repricing was immediate: the two‑year Treasury yield jumped more than 10 basis points to roughly 3.775% on the policy release, reflecting a revaluation of near‑term rate expectations. (cnbc.com) Equities dug in too—U.S. major indexes fell after the Fed signalled a slower easing path, with the S&P 500 sliding about 1.4% on the decision day as investors re-assessed discount rates and growth prospects. (bloomberg.com) The Fed’s press‑conference materials show the committee raised its near‑term PCE inflation projection to a median 2.7% for 2026 and 2.2% for 2027, and Chair Powell stressed the need to see clear inflation progress before authorizing cuts. (federalreserve.gov) Concrete econometrics projects tied to this pause: (1) estimate market‑implied cut probabilities from fed‑funds futures and short‑dated OIS using logistic regression or a Kalman‑filter latent‑probability model and benchmark forecasts against CME FedWatch probabilities (evaluate with Brier score and log loss). (cmegroup.com) A second project: run an event‑study and VAR on the ±10 trading‑day window around the March 17–18 FOMC (use FOMC release date and SEP series), measure abnormal returns in the Treasury curve (2y–10y), compute changes in term premia via Nelson‑Siegel or affine term‑structure fits, and test for regime shifts with a Markov‑switching model. (federalreserve.gov) (fred.stlouisfed.org)
