US Fed to unveil policy verdict amid ‘stagflation risk’, chief Jerome Powell eyes rate pause: 5 key things to know

US Fed Policy: US Federal Reserve began its two-day monetary policy meeting on March 18, amid broad Wall Street expectations of an interest rate pause at the current 4.25-4.50 per cent, despite ‘stagflation’ risks threatening the world's largest economy. US President Donald Trump's tariff hikes, which escalated a trade war with neighbor countries, have heightened inflation risks in the US.

As the US Fed meets today, the central bank and its chair, Jerome Powell, are potentially headed to a much tougher spot. Inflation improved last month but is still high and tariffs could push it higher. Also, tariff threats and sharp cuts to government spending and jobs have tanked consumer and business confidence, which could weigh on the economy and even push up unemployment.

Also Read: US Fed chair Jerome Powell signals rate pause over tariff-led economic uncertainty, ‘dot plot’ tweak likely ahead

The combination of still-high inflation and a weak or stagnant economy is often referred to as “stagflation,” a term that haunts central bankers. Stagflation, should it emerge, is hard for the Fed because typically policymakers would lift rates — or keep them high — to combat inflation. Yet if unemployment also rises, the Fed would usually cut rates to reduce borrowing costs and lift growth.

US Fed to unveil policy decision on March 19: Top five key things to know
 

1.US Fed chair Jerome Powell signals rate pause

US Federal Reserve Chair Jerome Powell said that the US Federal Reserve is likely to keep its benchmark interest rate unchanged in the coming months as it waits for widespread uncertainty stemming from President Donald Trump's policies.

US Fed chair Powell said the Trump administration is making policy changes in several areas, including trade, taxes, government spending, immigration and regulation, and added that the “net effect” of those changes are what will matter for the US economy and the US Fed's interest rate policies.

Also Read: US Fed holds key rates steady at 4.25-4.50% in first policy verdict of Trump Presidency; 5 key highlights
 

2.US Fed's ‘dot plot’ projections to be tweaked

US Fed Chair Jerome Powell signaled potential changes for the US Fed's closely watched "dot plot" interest-rate projections as part of a policy framework review underway at the US central bank and expected to wrap up by the end of summer. 

"On the communications...particularly our post-meeting communications, we're going to take a close look at the SEP and also compare ourselves to what other central banks around the world do," Jerome Powell said at a research conference in New York, referring to the US Fed's summary of economic projections.

3.US Fed ‘in no hurry’ to cut rates

“While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their likely effects remains high,” said US Fed's Powell. “As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves. We do not need to be in a hurry, and are well positioned to wait for greater clarity.”

Also Read: US Federal Reserve meeting begins: Will it shift stance amid Trump’s tariff risks, geopolitical uncertainty?

In the January US Fed verdict, Powell said in the post-policy press conference that the US central bank had paused the interest rates to see further progress on inflation. The US Fed policymakers had stated that labour market conditions remain solid, and US inflation remains ‘somewhat elevated’ in January.

4.Trump taps Michelle Bowman to be US Fed vice chair for supervision

Donald Trump on Monday picked Michelle Bowman to be the Federal Reserve's next vice chair for supervision, tapping someone seen as favoring a lighter touch to banking regulation. The central bank role requires confirmation by the Senate, which is controlled by Trump's Republican party.

"I am pleased to announce that Michelle 'Miki' Bowman will be the US Federal Reserve's new Vice Chair of Supervision," Trump wrote in a post on his Truth Social site. "Miki has the 'know-how' to get it done," he said. Bowman, a former community banker, was nominated by Trump to the Fed's governing board in 2018. 

The US Fed vice chair for supervision must be nominated from the ranks of the bank's seven-strong Board of Governors, which currently has three Republican appointees: US Fed chair Jerome Powell, Bowman, and governor Christopher Waller.

Also Read: Inflation vs Growth: What’s bothering US consumers the most ahead of US Fed policy meeting? Survey reveals..
 

5.Wall Street eyes two rate cuts in 2025

Softer US labor market conditions against the backdrop of the US trade-policy uncertainty have prompted Barclays to raise its expectations to two rate cuts by the US Federal Reserve for 2025 from one. The brokerage expects two quarter-point rate cuts in June and September. It had earlier projected one 25-basis point cut in June.

Barclays expect the first rate cut in June to "reflect indications of slower growth and rising unemployment" while the second rate cut in September to indicate "a rising unemployment rate and some signs of improvement in monthly inflation prints."

Following the cut in September this year, Barclays expects the central bank to remain on an extended pause and resume its cutting cycle in March 2026. It also lowered its Q4/Q4 2025 growth projections to 0.7 per cent from 1.5 per cent expected earlier.

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