Fed Remains in Tightening Mode in March

The US Federal Reserve remained in tightening mode at its March monetary policy meeting, raising its benchmark interest rate for the sixth time since December 2015. Chris Molumphy, chief investment officer, Franklin Templeton Fixed Income Group, offers his take on the market implications—and why he feels it’s more important for investors to focus on the US economy’s (healthy) fundamentals rather than the exact number of rate increases this year.

A Message of Continuity with Powell at the Helm

At its March monetary policy meeting, the Federal Reserve (Fed) raised its benchmark interest rate, the fed funds rate, by 25 basis points to a range of 1.50% to 1.75%. This was the result the markets were anticipating.

It was Jerome Powell’s first meeting as Fed chair, so many observers were anxious to see if his approach or communication style might differ. While his comments were a bit more succinct than that of his predecessor Janet Yellen, we did not see any radical departure from prior Fed communications or approach. I think the takeaway from the meeting was one of continuity, and the markets seemed to take comfort in that.

Market observers will dissect the nuances of Powell’s comments and the Fed’s economic forecasts to determine what may come next, but the Fed appears to be continuing its gradual, data-driven approach to policy decisions. The Fed’s official statement seldom changes much at each meeting, but it did state the economic outlook has strengthened in recent months, which I think is noteworthy.