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Fed Turns Even More Dovish in March – Downgrading Economic Outlook, Pausing Rate Hike Cycle, Ending Balance Sheet Reduction

The Fed has turned more dovish than previously expected. Besides downgrading the economic assessments at the policy statement, the members now expect no change in interest rate this year, followed by one rate hike in 2020. They also revised lower the economic projections and decided to terminate the balance sheet reduction plan in September this year.

Economic Projections

As noted in the accompanying statement, the inter-meeting economic data showed that “the labor market remains strong but that growth of economic activity has slowed from its solid rate in the fourth quarter. Payroll employment was little changed in February, but job gains have been solid, on average, in recent months, and the unemployment rate has remained low”. In January, the members judged that the “labor market has continued to strengthen and that economic activity has been rising at a soli