What to Know Ahead of Today's Fed Interest Rate Decision
All eyes in the financial and economic world will be laser-focused on the Federal Reserve as Chair Jerome Powell tries to balance his fight against inflation against a sudden banking crisis.
The latest interest rate decision and updated rate projections for the March FOMC meeting will be released at 2 p.m. ET on Wednesday. Powell will hold a press conference 30 minutes later.
Wall Street Predictions
Expectations for rate hikes among investors and economists have generally declined over the last two weeks, amid the collapse of three US regional banks and the takeover of Switzerland's Credit Suisse.
While most economists still expect a quarter-point interest-rate hike for March, some say policymakers should pause or even cut rates to restore financial stability.
On the other hand, futures markets are now pricing in about 87% odds that the Fed will raise rates by a quarter point, to a range of 4.75% to 5%, according to CME Group.
FOMC Forecasts
In early March, Powell said the Fed might raise rates higher than previously expected, indicating the "dot plot" could move above the 5.1% median forecast officials penciled in for the end of 2023.
In the wake of the recent banking crisis, however, Fed might choose to lower its rate projections or even suspend its projections as it did in March 2020.
"The difficulty there is not just what's happening in the financial markets right now, but also estimating to what extent banks might curtail lending as a result," said Sonia Meskin, head of US Macro at BNY Mellon.
FOMC Statement
The FOMC statement is likely to see substantial changes, and the committee could choose to drop its pledge of "ongoing increases" and use softer or conditional language that still hints at further tightening.
The Fed will probably also say it's "closely monitoring developments in financial markets and their implications for the economic outlook," said Jonathan Millar, a senior economist at Barclays in New York.
Balance Sheet
The Fed's balance sheet, which had been steadily declining on the central bank's gradual reductions of Treasuries and mortgage-backed securities, has rebounded to almost $8.6 trillion with the latest emergency actions to prop up the banking system.
Even so, the FOMC views its so-called quantitative tightening as a separate matter, and this is likely to continue with no changes, economists said.
Market Reactions
FOMC rate decisions have become a major source of market volatility in the past year, as the Fed embarked on the most aggressive tightening in decades to tame runaway inflation. The S&P 500 swung an average of 1.9% on the day that the Fed rate decision was released in the past year.
Source: Bloomberg, CME Group
Disclaimer: The content should not be relied on as advice or recommendation.
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搞经济 抄底 加仓 : Wondering you see all the US earnings 95% declining but the shares when uP^ . HK/CN earnings all positive but it all when Down. am I missing something