March FOMC Recap: The cycle is ending not per the Fed’s accord (and that has markets downbeat) …

Statement Recap: It was a close call but, in the end, they raised rates by 25bps with the Fed Funds range at 4.75-5.00%. The policy paragraph changes suggest that future tightening will be more passive (QT) vs active hikes.

Prepared Remarks: We also got one of the signals that we’ve been looking out for (since the start of the cycle) which is when the opening PSA remarks change focus it would suggest the Fed is close to the end, or at the end.

SEP Forecasts: The fact that the terminal was not adjusted for 2023 and remained at 5.125% suggests one more hike or this could be the last one. The big news in this SEP update was the downgrade of the growth outlook.

Presser Recap: Chair Powell suggested they were contemplating a pause heading into this meeting and repeatedly said “we don’t know” on numerous occasions. He also viewed bank credit tightening as substitutes to hikes.

Market Implications: Even though the Fed hiked rates at this meeting, they didn’t hike with conviction and the rates market sensed it from the start. This idea that the Fed could be done here was initially viewed favorably by all of the major US asset classes. However, the mention that FOMC participants still do not expect rate cuts this year started the first leg lower in risk assets.  And then separately, not related to the FOMC event per-se, the news that Treasury Sec’y Yellen is not considering a blanket bank deposit scheme sent financial markets a further leg lower. It’s obvious that at this stage the markets are keying off of anything related to the banking sector.

Please see the attached PDF for the full write-up…