Fed is set to keep interest rates unchanged at 4.25-4.50% today. The focus will be on the updated economic projections, which may drop hints that Fed is beginning to pre-empt a full-blown trade war into its outlook. Additionally, another key element to watch will be the closely followed “dot plot”, which will reveal whether Fed still expects two rate cuts this year.
Chair Jerome Powell’s press conference is important as usual, as he will need to balance Fed’s current economic assessment with the risks posed by US President Donald Trump’s trade policy. However, with no details on the big event of reciprocal tariffs on April 2, Powell is unlikely to offer any concrete guidance. Instead, he may just reiterate the central bank’s stance that it is “in no hurry” to cut rates and emphasize a data-dependent approach.
Currently, Fed fund futures indicate that June and September are the most likely timing for policy easing.
One key market reaction to watch will be 10-year Treasury yield, which recovery has clearly lost momentum well ahead of 55 D EMA (now at 4.389). Any dovish tilt from Fed today could push yields back toward 4.106 support. That would in turn keep Dollar under pressure.
Though, firm break of 61.8% retracement of 3.603 to 4.809 at 4.063 is not anticipated for now, at least until the tariff picture is cleared or there are more signs of recession in the US. On the upside, any rebound should be limited by 55 D EMA.
