TD Securities’ US macro team, including Oscar Munoz and Eli Nir, expects the FOMC to keep the Fed funds rate at 3.50–3.75% in March and stay on hold through Q3 2026. They see upgraded PCE inflation projections, two dovish dissents, and a cautious Powell who emphasizes dual-sided risks from the Iran-driven oil shock before resuming cuts from September.

Hold through Q3 as inflation risks rise

"We are revising our Fed call and do not expect another rate cut until September as the Fed assesses the recent developments in Iran and waits for further inflation normalization. The policy rate will remain at 3.50-3.75% at the March meeting."

"We now look for the Fed to stay on hold through the end of Q3 after recent developments in energy markets and actual inflation data through February. In our view, the current oil market situation makes achieving sufficient progress in the inflation profile nonviable by the June meeting — which was our original argument for easing."

"Still, we expect inflation conditions to support Fed easing by September. On a quarterly AR basis, we project core PCE inflation to edge close to 2% by the end of the third quarter. In our view, a string of m/ m core PCE increases averaging close to 0.2% would be sufficient evidence for the Fed to resume normalization toward neutral."

"We expect Chair Powell to maintain optionality in his press conference with the Iran conflict creating further uncertainty around the economic outlook. He will likely highlight that the current policy stance is well-positioned to respond to dual-sided risks from the conflict but that it is too soon to react."

"We do not expect any changes to the median dots across the forecast horizon."

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