Morgan Asset Management Quick Take: Fed Holds Rates Steady, Potential for One More Rate Cut This Year

Feature: Federal Reserve Keeps Interest Rates Unchanged; Financial Institutions Expect Only One Rate Cut This Year; Powell Says Impact of Iran War Still Unclear

On March 18, Eastern Time, the Federal Reserve announced at its March 2026 meeting to keep the federal funds rate in the range of 3.50% to 3.75%. Only one member, Milan, dissented, arguing that a 25 basis point rate cut was warranted given the weakening U.S. labor market. However, the dispersion of the dot plot released after the meeting narrowed, reflecting greater consensus among policymakers. Since market expectations for this meeting’s outcome were already high, the immediate global market reaction is likely to be limited.

At the post-meeting press conference, Fed Chair Jerome Powell expressed his views on supply-driven disruptions (such as oil and tariffs) affecting inflation: he considers the inflation impact of tariffs to be temporary, mainly a one-time increase in price levels rather than persistent inflationary pressure. Powell acknowledged that the Middle East conflict adds uncertainty to the economy but said it’s difficult to predict accurately and provided little insight into how the Fed might respond to a prolonged Middle East conflict. He emphasized that the focus remains on balancing the potential tensions between the Fed’s dual mandate—maintaining stable inflation and maximum employment.

In the economic projections released after the meeting, compared to the December 2025 FOMC meeting, the committee revised upward the median U.S. GDP growth rates for 2026 to 2028 to 2.4%, 2.3%, and 2.1%, respectively, with the long-term growth rate also raised to 2%. This suggests the Fed is more optimistic about the U.S. economy’s short-, medium-, and long-term outlook. Additionally, the latest forecasts raised the median unemployment rate for 2027 to 4.3%, and revised upward the PCE and core PCE inflation forecasts for 2026 and 2027 to 2.7% and 2.2%, respectively. These adjustments may reflect concerns about the impact of tariffs, artificial intelligence on employment, and the potential for short-term inflation increases driven by tariffs and Middle East tensions.

Source: FOMC, Date: 2026.3.19

The latest dot plot indicates there is room for one more rate cut this year, but the consensus for easing has diminished—only five members support further policy loosening, down from eight in the previous meeting. Notably, the median long-term federal funds rate forecast was raised by 10 basis points to 3.1%, implying current policy is closer to neutral. The Fed states that the policy rate is now in a “neutral to slightly restrictive” zone, and if inflation remains persistent or growth weakens in the coming quarters, there is still flexibility to adjust monetary policy.

Source: FOMC, Date: 2026.3.19

J.P. Morgan Asset Management believes that although the U.S. Supreme Court’s ruling has overturned some previous tariffs, the overall impact of tariffs is still unfolding. It may push inflation higher mid-year but could then gradually decline. If the Middle East conflict cools in the coming weeks, falling oil prices could further ease inflation pressures and create room for the Fed to ease policy later this year.

Previously, the expectation of moderate global economic growth supported risk assets. With policymakers expressing optimism about the U.S. economy, this outlook may be more solidified. For investors, maintaining a highly diversified portfolio remains a prudent strategy amid uncertainties. In an environment of bond and equity re-pricing, active management strategies may find opportunities for mispriced assets.

J.P. Morgan Asset Management (China) Limited uses “J.P. Morgan Asset Management” and “Morgan Asset Management” as its external brand names in Mainland China, consistent with the branding of JPMorgan Chase & Co. and its global affiliates. The firm operates a strict separation of business between shareholders and fund management activities, with shareholders not directly involved in fund asset investments.

Risk Warning: The above information does not constitute investment advice or an offer or invitation to subscribe to any securities, investment products, or services. All information is believed to be reliable but should be independently verified. Investing involves risks, and different asset classes have different risk profiles. Past performance is not indicative of future results. Please refer to the offering documents for details, including risk factors. Views and forecasts are current as of the date and may change later.

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