Will the Fed signal more or less rate cuts? Higher inflation expectations and dimmer growth prospects compete with each other. All eyes are on Chair Powell.
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Fed may opt for patience amid panic
The Federal Reserve (Fed) is projected to leave interest rates unchanged at its March meeting. However, every word that Chair Jerome Powell says – and every change to the bank’s forecasts – are critical for markets.
In the last “dot plot” in December, the bank signaled only two rate cuts are due in 2025, half of what it previously forecasted. That hawkish twist came as the economy looked strong and inflation was still not low enough.
Since then, President Donald Trump entered the White House, announcing tariffs and aiming to do more. That pushed inflation expectations higher while plunging consumer confidence. Markets and the Fed still do not have hard data to show how the economy reacted and may, therefore, wait.
By conveying a message of patience, Powell would soothe markets. A hawkish tone against inflation would support the US Dollar, while going dovish and signaling rate cuts would send Gold further up.
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