Tengah malam, seluruh pasar jatuh besar-besaran! Federal Reserve, pengumuman besar! Powell memberikan pernyataan penting!

The Federal Reserve continues to “hold steady.”

At 2 a.m. Beijing time on March 19, the Federal Reserve announced that the federal funds rate target range would remain unchanged at 3.50%—3.75%, in line with market expectations. The policy statement mentioned that the impact of Middle East conflicts on the U.S. economy remains uncertain. Additionally, the latest published dot plot indicates that the Fed policymakers expect one rate cut this year and another in 2027, but the specific timing remains unclear.

Subsequently, Fed Chair Jerome Powell’s remarks at the press conference signaled a “hawkish” stance. He stated that U.S. inflation remains stubborn, and uncertainties about the outlook have increased. If inflation shows no progress, the Fed will not cut rates. He also mentioned that some Fed officials favor reducing the number of future rate cuts.

Influenced by the Fed’s hawkish signals and escalating Middle East tensions, U.S. stocks plunged across the board. By the close, the Dow fell 1.63%, the S&P 500 dropped 1.36%, both hitting their lowest levels since November last year; the Nasdaq declined 1.46%. Major tech stocks fell collectively, with Amazon down over 2%, and Apple, Google, Microsoft, Meta, Broadcom, Tesla all down over 1%, Nvidia down 0.84%. Analysts warn that ongoing energy shocks could lead to inflation and growth slowing down, creating a “dangerous combination” that will pose greater challenges for the Fed in balancing its responsibilities.

Federal Reserve Announces: No Rate Cuts

On March 18, Eastern Time, amid escalating tensions in the Middle East and soaring oil prices, the Federal Open Market Committee (FOMC) released its latest rate decision, maintaining the federal funds rate target range at 3.50%—3.75%, in line with market expectations.

This marks the second consecutive FOMC meeting after three rate cuts last year, where no rate changes were made.

The decision to pause rate hikes was not unanimous. The FOMC statement noted that out of 12 voting members, 1, the Fed Governor Stephen Miran, voted against the decision, still favoring a 25 basis point cut.

This is the sixth consecutive FOMC meeting with dissenting votes, highlighting increasing internal divisions within the Fed.

Market expectations for the pause were already high. On the eve of the meeting, CME’s FedWatch tool indicated that traders priced in nearly a 99% chance of the Fed pausing rate hikes.

Compared to the previous meeting, the main difference in this statement was the addition of a sentence regarding Middle East developments.

The statement pointed out that the Iran conflict that erupted three weeks ago has added uncertainty. The conflict and its impact on the Strait of Hormuz have disrupted global oil markets and may keep inflation above the Fed’s 2% target. The statement said: “The development of the Middle East situation remains uncertain for the economy.”

The dot plot released after the meeting shows that most Fed officials expect one rate cut this year and another in 2027, though the exact timing remains unclear.

Of the 19 FOMC members, 7 expect no rate cuts this year, an increase of 1 from December last year. The median projection indicates further rate cuts in 2027, with the federal funds rate stabilizing around 3.1% in the long term.

While Fed officials’ outlooks on the U.S. economy have not changed much, they slightly raised their forecasts for economic growth and inflation for 2026.

In the latest economic projections, Fed officials expect U.S. GDP to grow 2.4% this year, slightly higher than the December forecast of 2.3%; for 2027, growth is projected at 2.3%, an upward revision of 0.3 percentage points from previous estimates.

Powell Signals “Hawkish” Stance

Since the rate hike pause was fully priced in by the market, attention has shifted to Powell’s latest remarks.

At the press conference held at 2:30 a.m. Beijing time, he warned that U.S. inflation remains stubborn, and uncertainties about the outlook have increased—from Middle East tensions to tariff disruptions, various variables are disrupting the inflation decline.

Powell clearly stated that he will not consider rate cuts until further inflation improvement is seen; meanwhile, the committee has begun discussing “the possibility of rate hikes next,” though this is not yet the baseline scenario for most officials.

He opened by saying that the U.S. economy is expanding, inflation remains somewhat elevated, consumer spending is resilient, but housing activity is weak. He believes the current policy stance is appropriate, “helping to achieve our goals.”

Powell reiterated that demand in the labor market has cooled significantly, but the unemployment rate has not changed much since last summer. Past rate cuts should have helped stabilize the labor market.

In Q&A, Powell added that there are indeed downside risks to the labor market, but several employment indicators show some stability.

He specifically pointed out that developments in the Middle East remain uncertain, and the Fed will closely monitor various risks. It is too early to judge the scope and duration of their impact on the economy.

Regarding U.S. inflation, he said recent inflation expectations have risen, energy price increases will push up overall inflation, and some oil shocks will be reflected in core inflation.

During Q&A, Powell admitted that inflation well above 2% is concerning. Many participants mentioned rising short-term inflation expectations, and all agreed to monitor inflation expectations very closely.

He mentioned that the dot plot of interest rate projections is not a preset path; future decisions will be made at each meeting. Some officials favor reducing future rate cuts.

In Q&A, Powell said that slow progress on tariffs affects inflation forecasts, and more time may be needed. Prolonged high oil prices could dampen consumption, and “we really don’t know what impact rising energy prices will have.”

He added that oil shocks can be offset by U.S. energy production; if oil companies believe the rise will persist, they will increase output.

Powell believes the current policy stance is just right, currently at the edge of tightening and easing. The policy rate is in the upper end of the neutral zone, or slightly restrictive.

He stated that if, by the end of his term as Fed chair, his successor has not been confirmed, he will continue to serve as “acting chair” until the successor is officially appointed.