Fed's Dot Plot to Show No Change to One Rate Cut Signal This Year, UBS Says

03:20 PM EDT, 03/16/2026 (MT Newswires) -- The Federal Reserve's updated economic projections due later this week will likely continue to signal one interest rate cut in 2026 amid uncertainty around the impact of the Middle East conflict, UBS Securities said in a note e-mailed on Monday.

The Federal Open Market Committee kicks off its two-day policy meeting on Tuesday, with a decision on interest rates due the following day. Markets widely expect the US central bank to keep its key lending rate unchanged for a second consecutive meeting, according to the CME FedWatch tool.

Along with a decision on interest rates, the Fed is scheduled to published its Summary of Economic Projections document. It includes the so-called dot plot, which anonymously shows 19 individual members' expectations regarding monetary policy. The document also contains estimates on economic growth, inflation and unemployment.

"We expect no change in the stance of monetary policy at the March FOMC meeting," UBS economists, including Jonathan Pingle, said. "We project the median FOMC participant would still assume that one 25 (basis-point) rate cut this year is appropriate."

After delivering three back-to-back 25-basis-point rate cuts last year, the FOMC paused in January, citing stabilization in the labor market and elevated inflation.

The FOMC statement will be little changed, though oil price gains may warrant a mention, Pingle wrote.

Fed Chair Jerome Powell, whose term as central bank chief ends in May, will likely be non-committal about future policy moves, Pingle said. While Powell is likely to underscore downside risks to the labor market, "the outlook for inflation probably looks worse," Pingle said.

Data showed last week that annual consumer inflation in the US held steady last month, before energy prices began surging in March as the Iran war broke out. The Fed's preferred inflation measure, measured by personal consumption expenditures and excluding food and energy, advanced to 3.1% annually in January, the Bureau of Economic Analysis separately reported.

US employment unexpectedly declined in February and the jobless rate ticked higher, according to data earlier this month.

Cleveland Fed President Beth Hammack and her Boston Fed counterpart, Susan Collins, recently said the central bank should hold its monetary policy steady for "some time" as it seeks evidence that inflation is cooling.

"A case could be made for an upward revision to the median dot," according to the UBS note. "However, given the seven board members, and three regional Fed Presidents we suspect remain concerned about the labor market or comfortable cutting, we think the median dot stays at 3.4% in 2026.

"We expect one or two participants who assumed a rate cut in December may revise to no 2026 cuts in the March SEP."

Last week, Wells Fargo Investment Institute said in a report that the Fed may deliver "fewer" interest rate cuts this year amid fears that the ongoing Middle East conflict could drive inflation higher.

"At the moment, (Fed officials) can wait, but at some point in the future maybe they cannot," UBS' Pingle said. "Oil prices could be a lot higher two months from now, but the unemployment rate could be too. Looking even a month ahead is pretty uncertain at the moment."

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