The Federal Open Market Committee (FOMC) convened on March 18-19, delivering a statement that reflected the current economic landscape and its implications for monetary policy. As anticipated, the Fed maintained the federal funds rate within the range of 4.25% to 4.5%, marking the second consecutive meeting without a rate change. This decision underscores the Fed's cautious approach amidst economic uncertainty, including the potential impacts of tariff policies and broader market dynamics. 

From my perspective, the FOMC’s statement resulted in four key takeaways:  

• Interest Rate Policy: The Fed maintained its current rate, signaling a "wait-and-see" approach as it monitors inflation trends and labor market conditions.  
• Economic Projections: The FOMC downgraded its economic growth outlook for 2025, citing increased downside risks compared to its December projections. Officials see inflation moving up this year more rapidly than previously expected; they also expect the trend to be short-lived. 
• Inflation and Employment: The Fed removed mentions of balancing employment and inflation goals from its statement, sharpening its focus on economic uncertainties. The Fed’s outlook sees inflation hitting 2.8% in 2025 but moving back to 2.2%, then 2% in the succeeding years.    
• Future Rate Cuts: While the FOMC previously anticipated multiple rate cuts in 2025, the latest projections suggest a more conservative approach, with only two cuts expected. 

Significant Changes in the FOMC’s Statement 

Notable changes to their statement included the elimination of references to balancing employment and inflation goals, signaling a heightened focus on economic uncertainty. Additionally, the Summary of Economic Projections (SEP) released during the meeting provided insights into the Fed's outlook.   

It seems like only yesterday the markets were projecting four rate cuts from the Fed. The Federal Reserve's "dot plot" is a visual representation of FOMC members' projections for the federal funds rate over the coming years. It provides insights into where policymakers believe interest rates are headed. Here's a summary of the latest dot plot: 

• 2025 Projections: Most FOMC members anticipate two rate cuts this year, bringing the federal funds rate down to a range of 3.75% to 4.0%. However, opinions vary, with some members projecting no cuts or just one.   
• Long-Term Outlook: By 2027, the federal funds rate is expected to approach its long-term target of around 3%.    
• Economic Context: These projections reflect concerns about slower economic growth, higher inflation, and the risk of stagflation.   

Detailed graphs, including the Federal Reserve’s “dot plot,” are available here.  

What Does This Mean for Credit Unions?   

For credit unions, lower rates could entice loan growth and loan refinancing. Credit union members could seek safety for their own investments and drive deposit growth at the credit union. Corporate One has seen growth in our deposits dating back to last year. We have seen a pick-up in demand for investments. Demand has been mixed between either maturities 1-year and under, and in the 3–5-year range, but this is dependent on the unique asset-liability needs of the credit union. 

Our team has seen inquiries into securities pick up as investors recognize better yield and more inventory than what is available in CDs. Products that have a positive yield spread over US Treasuries (Agencies and Mortgage-Backed Securities) offer an attractive alternative to Certificates of Deposit. There certainly is value in the 4–5-year area in Agency multifamily deals like Fannie Mae® DUS® bonds and Freddie Mac® Multi PC® deals. These options offer prepayment protection, principal lockouts (deal dependent), short final maturities, nice spreads to U.S. treasuries, and loan level transparency (i.e., LTVs, Debt Service Coverage, property location, etc.)   

Of course, the needs of each credit union’s balance sheet are unique and there has never been a “one size fits all” approach. The volatility of the economy could drastically change the situation. Having a plan that works for you and your credit union is paramount. Our team is happy to discuss available options with you, and you’re welcome to give us a call at 800/366-2677. 

Disclaimer: These views are my own and this doesn’t represent an offer to buy or sell securities.  

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