Research
March 19, 2025
Monetary Policy
Federal Reserve Holds Interest Rates Steady, Maintains Cautious Stance on Inflation
The Federal Open Market Committee (FOMC) held short-term interest rates steady at its March 18–19 meeting, aligning with expectations. The Federal Reserve pointed to ongoing economic strength, citing solid growth and low unemployment. However, officials acknowledged that inflation remains somewhat elevated, prompting a more cautious stance on monetary policy this year. As policymakers continue to monitor pricing pressures, uncertainties related to taxes and tariffs could shape economic data in the months ahead. With greater clarity over the coming months and with incoming data, future policy actions may adjust accordingly.
Alongside its decision, the Federal Reserve released updated median economic projections from FOMC participants. The outlook remains consistent with expectations from December, forecasting two rate cuts in 2025. However, opinions among policymakers remain mixed.
FOMC participants also revised their growth and inflation forecasts. Economic growth is now expected to slow in 2025, with a median forecast of 1.7%, down from 2.1% in December. Meanwhile, inflation projections have ticked higher, with PCE inflation expected to rise from 2.5% this year to 2.7%, and core PCE inflation increasing from 2.5% to 2.7%.
At the same time, the FOMC is working to normalize its balance sheet following post-pandemic highs. However, given economic uncertainties, the committee will slow the pace of reducing its U.S. Treasury holdings, scaling back from $25 billion per month to $5 billion. Meanwhile, the reduction of mortgage-backed securities will continue at $35 billion per month.
For the restaurant industry, interest rates directly impact borrowing costs, influencing expansion, renovations, and new initiatives. Lower rates could also benefit consumers by reducing credit costs and increasing discretionary income—potentially driving higher spending in hospitality and dining. While interest rates remain elevated for now, signals from the FOMC suggest potential cuts later this year, which could spur investment and boost consumer demand—key factors for industries dependent on confidence and spending, including eating and drinking places.
Alongside its decision, the Federal Reserve released updated median economic projections from FOMC participants. The outlook remains consistent with expectations from December, forecasting two rate cuts in 2025. However, opinions among policymakers remain mixed.
FOMC participants also revised their growth and inflation forecasts. Economic growth is now expected to slow in 2025, with a median forecast of 1.7%, down from 2.1% in December. Meanwhile, inflation projections have ticked higher, with PCE inflation expected to rise from 2.5% this year to 2.7%, and core PCE inflation increasing from 2.5% to 2.7%.
At the same time, the FOMC is working to normalize its balance sheet following post-pandemic highs. However, given economic uncertainties, the committee will slow the pace of reducing its U.S. Treasury holdings, scaling back from $25 billion per month to $5 billion. Meanwhile, the reduction of mortgage-backed securities will continue at $35 billion per month.
For the restaurant industry, interest rates directly impact borrowing costs, influencing expansion, renovations, and new initiatives. Lower rates could also benefit consumers by reducing credit costs and increasing discretionary income—potentially driving higher spending in hospitality and dining. While interest rates remain elevated for now, signals from the FOMC suggest potential cuts later this year, which could spur investment and boost consumer demand—key factors for industries dependent on confidence and spending, including eating and drinking places.