USD: Fed holds line on 2026 easing – Rabobank

Rabobank highlights that the FOMC’s March projections show higher PCE and core PCE inflation at 2.7% in 2026, yet unchanged median rate dots, implying only a temporary inflation shock. The dot plot still embeds one cut as the median, with a wide hawk–dove dispersion, while the longer-run neutral rate is nudged up to 3.1%, supporting a relatively firm US Dollar backdrop.

Higher inflation but unchanged Fed dots

"The new Summary of Economic Projections showed substantially higher inflation, both headline and core. Both are now seen at 2.7% in 2026, but they are also expected to fall rapidly to 2.2% in 2027."

"This suggests that FOMC participants expect only a temporary rise in inflation, which they could decide to look through when making rate decisions. This is confirmed by the unchanged median rate projections."

"Despite higher inflation and GDP growth, the median rate projections for 2026, 2027 and 2028 were unchanged. The longer run rate projection was actually revised upward to 3.1% from 3.0%."

"If we look at the dot plot, there is still a wide range of views in the Committee. On the hawkish side of the spectrum, 7 participants do not expect a single rate cut in 2026."

"On balance, it would take three participants who now expect one cut to change their mind to no cut, to move the median rate projection to zero cuts. Compared to the December dot plot, the range of forecasts for 2026 has narrowed to 2.6-3.6% from 2.1-3.9% and the central tendency moved up to 3.1-3.6% from 2.9-3.6%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)