The Fed kept rates on hold Wednesday. Obviously.

I say “obviously,” but it’s worth recalling that a March rate cut was almost fully priced not so long ago. The market was pushing the issue pretty hard earlier this year.

The Fed pushed back at the last meeting, effectively ruling out a move in March. Subsequent developments, including a couple of inflation overshoots and cautious rhetoric from officials, succeeded in coaxing market pricing back in line with the December dot plot, which implied three cuts for 2024.

The new dot plot, released on Wednesday, tipped the same three cuts but the 2025 median shifted higher to reflect three cuts next year rather than four.

So, traders and the Fed still generally agree on the “right” amount of marginal easing for this year, at least.

In the lead up to the meeting, market participants developed an obsession with the new dots. Some suggested traders’ single-minded focus on the median 2024 dot was overdone: Would two projected cuts versus three really change the narrative in a meaningful way?

If you’re Nigel Tufnel, the answer’s probably yes. “Well, it’s one less isn’t it?” But it’s cuts either way. And besides, if the Fed had opted to convey one less, that would’ve arguably reflected an upgraded growth assessment just as much as it would’ve suggested some caution around the inflation outlook.

The upward shift in the 2025 median’s irrelevant. Sorry. No one knows what’s coming next month on the macro front, let alone next year.

Not irrelevant, though, was a small upward shift in the long run median dot to 2.6% from 2.5%. That suggests that at the margins anyway, the Fed believes neutral’s higher in the post-pandemic, war era.

In my FOMC preview, I suggested Powell doesn’t want to have the neutral rate debate just yet, or not in a comprehensive way. Although the shift was small, it still called for a discussion with the media. A higher neutral rate suggests current policy settings aren’t as restrictive as previously thought. It also makes for a somewhat awkward juxtaposition with three rate cuts in 2024, although I suppose the Fed can square that circle via the upward shift in the 2025 and 2026 dots. Do note: There are now nine long run dots above the old median.

The core PCE forecast for year-end was bumped up to 2.6% from 2.4%. Even the higher projection may prove optimistic and it in any case doesn’t imply much in the way of disinflation from where we are now.  Who knows. And, again, that’s really the whole point: The hand-wringing associated with the new SEP belied the hopelessly indeterminate nature of the prevailing macro environment.

The simple figure above underscores the difficulty of cajoling underlying price growth the rest of the way down to target.

The “median” Fed official still expects core price growth on the Committee’s preferred gauge to be 2.2% in 2025 and 2% in 2026. The unemployment rate projections for 2024 and 2026 were marked down slightly to 4% from 4.1%. 2025’s projection was unchanged at 4.1%. Plainly, a cycle high UNR of 4.1% would count as a win for the Fed considering the scope and rapidity of the hiking cycle. The GDP projections were all marked up to 2.1%, 2% and 2% for this year, next year and 2026, versus 1.4%, 1.8% and 1.9%, respectively, in December.

The forward guidance in the statement was unchanged. “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the statement read.

Recall that Powell, during his congressional testimony earlier this month, indicated that the Fed’s “not far” from the confidence they need to start dialing back rates. And yet, the unchanged statement language suggests the odds of a move in May are negligible. The cadence pretty much has to be June, September, December.

The assessment of the economy was mostly unchanged. Indeed, the only change to the statement was a tweak to the language around the labor market, which got an upgrade. Job gains “have remained strong,” the Fed said. In January, that sentence read: “Job gains have moderated since early last year but remain strong.”

Although the statement said nothing new on the balance sheet, you can be sure there was an in-depth debate at the meeting. Expect details in May. The Fed’ll probably slow the pace of runoff from June. Powell was sure to provide an update in the press conference.

Bottom line: The March projections and communications felt a bit convoluted. The Fed’s plainly not prepared to cut in May, but still expects to cut three times in 2024 despite recent inflation overshoots and a warmer core PCE projection. Neutral’s apparently a bit higher, and the lack of new information around the QT taper felt a bit like brinksmanship. I wouldn’t call this the Fed’s finest communications moment.