U.S. Desk Strategy Market Views

Bottom-line: Expectations have been all over the map but are now pricing in a hike, does that alone force the Fed to hike? No – let us explain (please see the report)…

• Monetary Policy Updates: given the market volatility and bank liquidity needs, we think it’s a much closer call than what is currently priced-in, Dots Un’chg
• March FOMC Scenarios: We have a 50% chance for our base-case (hawkish pause) vs a neutral (45% prob) of A dovish hike or A hawkish hike (5% prob)
• Market Implications: markets are priced to a dovish hike outcome, the fed doesn’t like to disappoint, but prudent actions are sometimes warranted
• In our cross market analysis part 1: We’ve not seen such extreme moves ahead of a “live FOMC meeting”.
• In our cross market analysis part 2: The spread widening, FCI tightening has been large intra-meeting too.

NOTE – We also provide an updated US economy scenarios – we up our stagflation odds and tweak our recession odds - risk of both is the worst case scenario…