Fed Holds Rates Steady, Still Sees 2 Cuts Ahead

The Federal Reserve held its benchmark interest rate steady at the conclusion of the March 18-19 meeting of its policy-making Federal Open Market Committee (FOMC).

For the second time this year, the FOMC maintained the target range for the federal funds rate – a key short-term interest rate that influences other rates in the economy – at 4.25% to 4.50%. Rates have remained in that range since the Fed’s December meeting, supporting the central bank’s wait-and-see approach to changes.

Although recent indicators suggest that economic activity has continued to expand at a solid pace, “inflation remains somewhat elevated,” according to the Fed’s statement on its rate decision. 

Policymakers also released their updated Summary of Economic Projections (SEP) at the March gathering, which includes the “dot plot” chart showing rate predictions over the next few years. 

Officials still expect two more rate cuts in 2025, despite an uncertain economic outlook caused by tariff rollouts and recession concerns, among other factors. 

What is the Fed’s latest dot-plot rate forecast?

The Fed’s SEP includes an updated dot plot with forecasts for rates and other key economic indicators.

The latest SEP leaves the dot plot unchanged in 2025, with two 25 basis point cuts expected by the end of the year. Fed officials predict two more quarter-point cuts in 2026 and another one in 2027. 

The chart below shows the Fed’s predictions in December 2024 and this month for where these metrics will be at the end of 2025.

What does the rate pause mean for deposit accounts?

With rates on pause, consumers shouldn’t expect to see much change in deposit account rates over the next couple of months — and that’s good news, according to LendingTree chief credit analyst Matt Schulz. That’s because Fed rate cuts mean lower returns on deposit accounts, “which is what we saw in late 2024 and early 2025.”

If you still have a traditional savings account, it is a good time to shop for an online high-yield savings account, he says. 

You may have missed peak rates from 2024, but Schulz notes that “returns are still really strong and likely will continue to be for a while as the Fed leaves its foot off the gas when it comes to rate cuts.”

Another smart move would be to buy a certificate of deposit (CD) to lock in a competitive rate.

“Rates are still high now, but it’s anyone’s guess what rates — and the economy overall — will look like for the next six months to a year,” Schulz says. “You can protect yourself against that uncertainty by opting to buy and lock in rates now.”

What the federal funds rate is and how it affects you

The federal funds rate target is established by the FOMC at meetings held eight times a year. It sets the range for the interest rates banks charge to borrow from each other overnight. 

Most importantly, the federal funds rate is a key benchmark, with many other interest rates based on it. Its movements can affect earnings on savings accounts, as well as payments on credit cards and loans.

Rather than target an exact rate, the Fed gives a range with upper and lower limits, which are usually 0.25 percentage points apart.

Understanding Fed rate changes

Shifts in expectations for the federal funds rate can affect rates overall, especially longer-term rates. As such, if the federal funds rate were to fall as suggested, then bond yields and rates for CDs and mortgages would likely follow suit. 

When does the Fed meet in 2025?

These are the remaining scheduled Fed meeting dates for 2025:

• May 6-7
• June 17-18
• July 29-30
• Sept. 16-17
• Oct. 28-29
• Dec. 9-10