Sat, Mar 25, 2023 @ 04:56 GMT
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Fed to hike in Powell’s debut

Fed is widely expected to raise federal funds rate by 25bps to 1.50-1.75% today. Fed fund futures are pricing in near 95% chance of that. There is no reason for Fed to give market a surprise. The main question in everybody’s mind is whether Fed will hike a total of three times this year, or four. Fed fund futures are pricing more than 80% chance of another hike in June already, and close to 60% chance of another in September. But for now, it’s only pricing less than 40% chance of the fourth in December.

As usual with a March FOMC meeting, new economic projections will be released. Given that the Republican’s tax cuts were done, there could be upward revisions in growth. Unemployment rate forecast might be left unchanged. PCE core at 1.5% in January, is still way off Fed’s median projection of 1.9% in 2018. There is little chance of a change in that figure. Meanwhile, any slight change in the federal funds rate projection would be market moving.

Fed’s December projections:

The event also bears additional significance as it’s Jerome Powell’s first press conference as Fed chair. His Congressional testimony was seen by some as more hawkish and upbeat than expected. Recapping that he said “my personal outlook for the economy has strengthened since December.” And, “we’ve seen some data that will in my case add some confidence to my view that inflation is moving up to target.” Powell might maintain the tone today and indicate his confidence in continuing the tightening cycle.

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