Not in a hurry to get worried
Our base case is for the March FOMC meeting to be a neutral to slightly dovish event, with the biggest risk that the Fed announces the end of QT. We expect the 2025 dot plot to remain unchanged at 2 cuts this year, though there is a chance that it is a close call between 2 and 3 cuts (aligned with market pricing). The house view is also 2 cuts this year. Furthermore, we anticipate lower GDP forecasts given recent growth concerns amid policy uncertainty.
Recently, the focus has shifted from inflation to growth/labor market concerns, given a slowdown in government hiring and a recent spike in job cut announcements. Meanwhile, the issue is US rates markets have rallied and priced-in a lot of the uncertainty ahead of the Fed, so the market reaction may be limited unless there is a notable change in forward guidance (i.e. the end of QT mentioned earlier).
In the supporting chartbook, we analyze labor and inflation trends, as well as the rates/macro environment that will inform the Fed’s policy path ahead.
Please see the link for the full write-up with charts and scenarios…
