The Fed left rates on hold Wednesday, as expected.

There was exactly no chance of a rate cut at the March gathering. Notwithstanding mounting evidence that the US economy’s slowing, and while readily acknowledging that six months is an eternity in a world governed by Donald Trump, a move before September seems unlikely as things stand today.

Survey-based measures of household inflation expectations moved higher recently, and there’s no mystery as to why: Americans are concerned about the read-through of tariffs for prices. Late last week, a key gauge of consumers’ outlook for longer-term price growth soared to the highest since 1993, a development which doubtlessly caused consternation among Fed officials, particularly those already disinclined to cut rates further.

The new statement described inflation as remaining “somewhat elevated,” unchanged from the language employed in January. Although CPI data for February was relatively benign, underlying price growth was brisk the prior month and anyway remains far too warm for comfort, particularly in the context of a Fed that’s already delivered 100bps of rate cuts.

The Committee dropped the somewhat belabored, and by now stale, language about its goals being “roughly in balance” in favor of a more concise second paragraph which alluded to macro ambiguity. “Uncertainty around the economic outlook has increased,” the Fed said. “The Committee is attentive to the risks to both sides of its dual mandate.”

The refreshed dot plot tipped the same 50bps of easing this year as December’s SEP. In my March FOMC preview, I suggested that was the path of least resistance. Growth risks are serious enough to give the Committee plausible deniability even in the face of core inflation that’s quite stubborn.

Leaning hawkish via the dots (i.e., tipping just one cut for 2025) risked additional, and probably unnecessary, pain for risk assets, not to mention unwanted dollar strength. Leaning dovish (i.e., tipping three cuts for this year) would’ve been tough to square with the reality of elevated inflation and price growth expectations.

It was notable that eight submissions suggested one or no cuts at all. There were just four such submissions in December. Only a pair of participants saw three cuts this year, whereas five saw three or more in the December dots.

The 2025 core PCE projection in the new SEP was 2.8%, up sharply from 2.5% in December. The 2026 projection was unchanged, at 2.2%. The long run dot stayed put at 3% (the highest since 2018, you’re reminded). Not surprisingly, the growth outlook for 2025 was marked lower to 1.7% (below the long run projection) from 2.1%, and to 1.8% from 2% in 2026. The unemployment projection for this year moved up a tenth to 4.4%.

So, that’s quicker core inflation, slower growth and a higher jobless rate versus December, which is to say the new SEP moved in a stagflationary direction. I’m not being a partisan to say that’s almost entirely a function of Trump’s proposed policy mix and what we’ve seen from the administration so far.

There’s merit to the idea that growth worries are overblown, and that GDP tracking suggestive of a meaningful Q1 contraction overstates the scope of any nascent slowdown. But even the Trump administration (and the big man himself) says the world’s largest economy could be in for some near-term — and hopefully short-lived — pain. The Fed can’t simply ignore that risk because someone might call their projections partisan.

The same goes for the inflation outlook. Even if you don’t want to extrapolate bad outcomes tied to tariffs, the fact is, core inflation’s stubborn. And the projections reflect as much. It just is what it is.

Also on Wednesday, the Fed tapered Treasury QT almost entirely. Starting next month, UST runoff will slow to $5 billion from $25 billion. The runoff cap for MBS was unchanged, in keeping with the Committee’s aim to get out of the mortgage insurance business, for lack of a more delicate way to put it. Notably, Chris Waller dissented on the QT decision. He wanted to keep it going at the current rate. Some observers will tell you the Fed plans to restart UST QT at the $25 billion pace once the fog clears around government funding in D.C. Don’t kid yourself: QT’s all but over on the UST side, and frankly it’s a miracle it went on for as long as it did without something breaking.

So far, Trump’s left Fed message management mostly to Scott Bessent. Once upon a time, Bessent suggested appointing a “shadow Fed Chair” who might communicate and advance the administration’s policy preferences should they deviate from the Committee’s until Powell’s term ends next year. Thankfully, Scott doesn’t talk about that anymore, and indeed, he doesn’t talk so much about monetary policy at all, preferring (wisely) to focus on what can be done to bring down 10-year yields.

Of course, when Bessent said the administration wanted to see benchmark US borrowing costs fall, he didn’t have in mind a bond rally predicated on recession fears. But whatever works I guess? That’s a question. I really don’t know how the administration’s thinking about this situation currently. Some have declared the “Trump put” (for stocks) dead, others say it’s just struck much lower than Wall Street initially expected.

As for the “Fed put,” it’s probably still in play, but thanks to inflation realities, it too is struck somewhere deeper into pullback territory than the S&P ventured last week, if not perhaps all the way to the 20% bear market threshold.

Long story short, there were no surprises in the FOMC decision, nor in the projections, save perhaps the hawkish skew in the 2025 dot dispersion. Any fireworks were left to Powell’s press conference.