The Federal Reserve's March 2025 FOMC meeting was held from March 18 to 19 (EST). On March 19, the Fed announced that it would keep the federal funds rate range unchanged at 4.25%–4.50%. This was the Fed's second policy meeting of 2025 and the second consecutive decision to pause rate cuts since the easing cycle began in September last year.

Boosted by the Fed’s "dovish" decision, all three major U.S. stock indexes rose across the board.

Market expectations & policy stance

• Fed Governor Christopher Waller explicitly supported pausing rate cuts but opposed slowing the balance sheet reduction, advocating for maintaining the current pace.

• Meeting Statement & Economic Forecast: As expected, the Fed did not cut rates and still projects two rate cuts within the year. The March 2025 meeting kept the policy rate at 4.25%–4.50% and announced plans to further slow balance sheet reduction starting in April, reducing the monthly Treasury runoff from $25 billion to $5 billion.

• Market Expectations Shift: Growing concerns over economic growth have led markets to price in three rate cuts this year, potentially starting in June. As of this Tuesday’s close, CME's FedWatch tool showed a 99% probability that the Fed would hold rates steady this week, an 84% probability of no rate cut in May, and a nearly 75% probability of a cut in June.

*Reference：https://stcn.com/article/detail/1595640.html

Trump’s new policies complicate Fed’s decision-making

1. Dual impact of tariff policies

• Supply chain costs & inflationary pressures:

  • Trump has imposed a 20% tariff on Chinese imports and a 25% global tariff on steel, aluminum, and copper (effective March 12).

  • This has driven the manufacturing price index to 62.4, the highest since July 2022.

• Fed’s concern over inflation stickiness:

  • The January FOMC minutes revealed that Fed officials are highly concerned about tariffs prolonging inflationary pressures, potentially raising core PCE forecasts from 2.5%.

• Market reactions & capital flows:

  • The tariffs have accelerated global supply chain restructuring.

  • US Tech stocks have tumbled (Nasdaq down 11.86%), while Chinese stocks have diverged.

  • The MSCI China Index's P/E ratio has dropped to 8-10x, attracting capital inflows into Asian markets.

2. Fiscal tightening & recession signals

• Government spending cuts impacting the economy:

  • Trump has eliminated seven federal agencies, saving $53 million, and cut Education Department staff by 50%.

  • These moves have sharply reduced government procurement orders, causing small business confidence to hit its lowest level since 2020.

• Rising recession fears:

  • The Atlanta Fed’s GDPNow model briefly turned negative.

  • January retail sales fell 0.4% MoM, while consumer confidence dropped to 98.3 (a 10-month low), heightening concerns about a hard landing.

*Reference：

• https://news.qq.com/rain/a/20250315A00R7300

Global market ripple effects

1. Focusing on interest-sensitive technology and AI sectors

2. Chinese concept technology stocks become the focus of long-short game

3. Disruptive technology stocks

4. Stock index ETF

5. US Treasury

6. Finance stocks