The Federal Reserve (Fed) kept its benchmark interest rate unchanged in the 3.50%-3.75% range during its latest policy meeting, with an 11-1 vote as Governor Stephen Miran dissented in favor of a 25 basis point rate cut [1][4]. Chair Jerome Powell emphasized a patient approach, stating that the Fed is not prepared to overlook persistent inflation and that convincing progress is required before considering rate cuts [1][4]. The Fed's updated Summary of Economic Projections (SEP) and dot plot indicate expectations for only one rate cut in 2026 and another in 2027, with the federal funds rate projected at 3.4% by the end of 2026 and 3.1% in 2027 and 2028, matching December's projections [2][3][4].
The Fed revised its economic outlook, raising the US Gross Domestic Product (GDP) forecast to 2.4% for this year and 2026, up from 2.3% previously, and projecting 2.3% growth in 2027, above the prior 2% estimate [3][4]. The unemployment rate is expected to remain at 4.4% by the end of 2026 and fall slightly to 4.3% in 2027, both broadly unchanged from earlier forecasts [3][4]. However, inflation remains a concern: the Personal Consumption Expenditures (PCE) Price Index is now projected at 2.7% for this year and 2026, up from 2.4% in December, and is expected to ease to 2.2% in 2027 and 2.0% in 2028 [2][3][4]. The February Producer Price Index (PPI) came in higher than expected at 3.9%, up from 3.5%, highlighting ongoing inflationary pressures [2].
Market reaction was relatively muted, as the Fed's decision was widely anticipated. The US Dollar Index (DXY) rose, hitting the 100 mark, with USD/CHF climbing roughly 0.78% to 0.7908 and NZD/USD sliding by 0.71% to around 0.5814 following the announcement [2][4]. Powell noted that near-term inflation expectations have increased due to developments in the Middle East, particularly energy prices, and stated, "If I don’t see inflation progress, you won’t see the rate cut" [4]. The FOMC reiterated that future policy decisions will depend on incoming data and the evolving balance of risks, especially given elevated uncertainty linked to geopolitical developments [4].
On the international front, the Swiss State Secretariat for Economic Affairs (SECO) slightly downgraded its growth outlook for Switzerland to 1.0% for 2026, down from 1.1%, and raised its inflation forecast to 0.4% from 0.2%, citing rising energy prices linked to Middle East tensions [4].
Technical analysis for NZD/USD suggests a neutral to bearish bias, with the pair trading below key moving averages and immediate support at 0.5832 and 0.5813, while resistance is seen at 0.5856 and 0.5910 [2].
CONCLUSION
The Fed's decision to hold rates steady while signaling a higher-for-longer stance and raising inflation forecasts has reinforced US Dollar strength and kept markets cautious. With only modest changes to growth and unemployment projections, the focus remains on persistent inflation and geopolitical risks. The bar for rate cuts has been raised, and future policy will be data-dependent, keeping market participants attentive to upcoming economic releases.