Core Viewpoint - The Federal Reserve's March 2025 FOMC meeting resulted in a unanimous decision to maintain the federal funds rate target range at 4.25-4.5%, marking the second pause since the rate cut cycle began in September 2024. The Fed also indicated a further slowdown in the pace of balance sheet reduction, with internal disagreements on the approach to controlling inflation amidst a lack of progress [1][5][7]. Group 1: Federal Reserve's Decisions - The FOMC statement was more dovish than expected, highlighting increased uncertainty in the economic outlook and an earlier-than-anticipated slowdown in quantitative tightening (QT) starting in April, with the monthly redemption cap on Treasury securities reduced from $25 billion to $5 billion [1][7][9]. - The Fed's decision to slow QT is seen as a response to potential volatility in bank reserves due to the U.S. debt ceiling situation, which could impact liquidity in the banking system [10][19]. Group 2: Economic Projections - The March Summary of Economic Projections (SEP) reflects a cautious outlook, with GDP growth forecasts for 2025 and 2026 revised down to 1.7% and 1.8%, respectively, while inflation expectations were adjusted upward [3][18]. - The unemployment rate forecast for 2025 was slightly increased to 4.4%, and the PCE and core PCE inflation forecasts were raised to 2.7% and 2.8%, respectively [3][18]. Group 3: Market Reactions - Following the FOMC meeting, U.S. equity markets rebounded, with the S&P 500 rising by 1.08%, and the Nasdaq increasing by 1.41%. The yield on the 10-year Treasury note fell slightly from 4.28% to 4.24% [21]. - Market expectations for rate cuts in May and June 2025 increased, with probabilities of 19.4% and 57%, respectively, reflecting a shift in sentiment towards a more dovish monetary policy outlook [19].

Group 1 - The report assesses the risk of an economic recession in the United States, highlighting that historical patterns show a tendency for recessions to follow periods of rising interest rates [6][23][54] - Current indicators suggest a gradual economic slowdown, with key metrics such as labor market data, wage growth, and manufacturing activity showing signs of weakness [9][40][44] - The report anticipates a "soft landing" for the U.S. economy in 2025, provided that policies do not significantly impact inflation and living costs [6][54] Group 2 - The analysis indicates that the U.S. labor market remains stable despite signs of slowing growth, with unemployment rates rising slowly and permanent layoffs remaining low [44][46] - Credit market conditions are favorable, with investment-grade corporate bond spreads at their lowest levels in three years, indicating low risk in the private sector [46][49] - The report emphasizes that monetary and fiscal policies are supportive of economic growth, with lower inflation allowing the Federal Reserve to reduce interest rates [50][54]