The Fed Held. The Dot Plot Tells a Different Story.

The Federal Reserve held rates at 3.50% to 3.75% today. Nobody is surprised. The hold was priced in at 99.4% certainty. The story is not the decision. It is the dot plot, the PPI number that came in this morning, and what Jerome Powell said in what may be his final press conference as Fed Chair.

The Hold Nobody Doubted

The FOMC voted to keep the federal funds rate unchanged at its March 18, 2026 meeting. This is the right call given the level of uncertainty in the current environment and the committee knows it. Oil briefly crossed $119 per barrel after U.S. and Israeli strikes hit Iran’s Kharg Island deepwater terminal. A new round of 15% global tariffs is feeding through to goods prices. February PPI came in this morning at +0.4% month-over-month, keeping the year-over-year rate near 3%, well above the Fed’s 2% target. You do not raise rates into a geopolitical shock, and you do not cut them when inflation is still running hot. You hold and you wait.

What the Dot Plot Actually Shows

This is the part that matters. The quarterly Summary of Economic Projections, the dot plot, shows where each FOMC member expects rates to be at year-end. The December 2025 dot plot showed a median expectation of 1 cut for 2026. Today’s update is expected to reflect the new reality.

The June cut is gone. Markets have fully abandoned that expectation. The new consensus prices in 1 cut, in December 2026, and nothing further until at least mid-2027. Deutsche Bank expects the median headline PCE inflation projection to move up to 2.7% for 2026, and the longer-run neutral rate to inch up to 3.1%. That is a meaningful shift. A neutral rate of 3.1% implies that rates at 3.50% to 3.75% are not especially restrictive, which removes the urgency to cut.

The hawkish tail risk is real. If the dot plot shows zero cuts for 2026 or any discussion of rate hikes, markets would need to reprice sharply. Interest rate futures currently assign roughly a 25% probability to at least 1 hike in 2026. That probability has risen from near zero before the Iran conflict began.

PPI This Morning: The Number the Fed Cannot Ignore

February PPI data was released at 8:30 AM ET today. January’s reading was already hot: +0.5% month-over-month against a forecast of +0.3%, with services PPI up 0.8%, the largest monthly gain since July 2025. Core PPI, excluding food, energy, and trade, is running at 3.4% year-over-year.

February’s number reflects the first full month of tariff impact and the beginning of the energy price shock. The Hormuz disruption did not fully hit until mid-February, which means the March number will show the real damage. The Fed is essentially looking at stale data while making forward-looking decisions in a fast-moving environment.

Powell’s Last Stand

Jerome Powell’s term as Federal Reserve Chair expires in May 2026. Today’s press conference is likely one of his final major public appearances in the role. Kevin Warsh, widely expected to succeed him, is viewed as more hawkish and more willing to let rates stay elevated longer. Markets are already pricing in a leadership transition that pushes cuts further into the future.

Powell’s comments today carry extra weight for that reason. Any signal of comfort with current rates, any acknowledgment that the inflation trajectory has shifted, will be amplified by the anticipation of a more hawkish successor. The message from the Fed today is likely to be: we are watching, we are not in a rush, and the Hormuz situation changes everything.

What To Watch

The key signals from today’s meeting in order of importance:

• Median dot plot for 2026: 1 cut confirms the market consensus. Zero cuts is a hawkish surprise. Any hike language is a market-moving event.
• Longer-run neutral rate: A move above 3.0% signals the Fed thinks rates need to stay higher for longer structurally, not just cyclically.
• Powell on oil: Does he call the energy shock transitory? If yes, that is dovish. If he acknowledges persistent upside risk, that is hawkish.
• Dissent count: Multiple dissents in either direction tell you the committee is genuinely divided on what to do next.

Bitcoin has dropped after 7 of 8 FOMC meetings in 2025. Oil is at $93 today, pulling back from $119 highs as negotiation signals emerge from the Middle East. Stocks are holding gains. The market is telling you it expects a neutral outcome. If Powell delivers anything other than neutral, the afternoon will be interesting.