The Federal Reserve is expected to keep the fed funds target range unchanged at 4.25%-4.50% at its rate decision at 1800 GMT, and likely to reiterate that it is in no hurry to ease monetary policy just yet. Investors will be watching for any comments on the economic implications of tariffs and on recent stock-market volatility, Adjustments to economic forecasts are possible. The following is a selection of analyst comments.
Treasury Yields Rise Ahead of Fed Decision
1103 ET - The central bank is expected to remain on hold for a while, and investors wait for Chair Powell presser, when he is likely to face questions about the impact of tariffs and other policies on the economy. CME data shows that markets are pricing in a hold today and at least two cuts this year, although there is much uncertainty. March inflation data, due next month, are expected to show more clearly the effect of tariffs on prices. The 10-year is at 4.296% and the two-year at 4.073%. (paulo.trevisani@wsj.com; @ptrevisani)
Dollar Could Recover Further in Near-Term
1501 GMT - The dollar's modest gains haven't changed its position as the worst-performing G-10 currency in the year to date but they do raise the possibility of a further recovery, Rabobank's Jane Foley says in a note. The dollar likely saw some safe-haven buying following the sharp selloff in Turkish assets after President Recep Tayyip Erdogan's rival Ekrem Imamoglu was arrested, she says. It's also probably supported by speculation that the Federal Reserve could dampen market expectations for three more interest-rate cuts in a decision at 1800 GMT. The dollar could rise further near term if the Fed suggests inflation concerns will limit rate cuts, she says. The DXY dollar index rises 0.5% to 103.728. (renae.dyer@wsj.com)
Gold Futures Rise to Near Record Ahead of Fed Meeting
1204 GMT - Gold futures rise, hovering near record highs ahead of a U.S. Federal Reserve meeting. Futures are up 0.2% at $3,046.70 a troy ounce, after setting a fresh record of $3,052.40 earlier in the session. Safe-haven demand, persistent central bank purchases of bullion, a weaker U.S. dollar and sliding U.S. Treasury yields have all pushed gold higher, SP Angel analysts say in a note. The greenback has weakened following bearish Treasury and White House commentary on the state of the U.S. economy, alongside some negative economic data, SP Angel says. Wednesday's Fed meeting is unlikely to see monetary policy changed, though the market will scrutinize commentary for clues on the scale and scope of potential interest rate cuts. Lower interest rates typically benefit non-interest bearing gold. (joseph.hoppe@wsj.com)
Fed Pause Could Be a Headwind for Commercial Real Estate
1149 GMT - The Fed is likely to hold interest rates steady at the conclusion of its meeting on Wednesday. That could keep commercial real estate in a holding pattern of its own, Emengarde Jabir of Moody's writes. "Commercial real estate is becoming accustomed to the current interest rate environment although would still very much benefit from rate cuts to bolster values and cap rates," Jabir writes. "Rate cuts would also encourage more transaction activity although volumes are recovering as market expectations of rate cuts have shifted to become more accepting of the current rate environment." (matt.grossman@wsj.com, @mattgrossman)
U.S. Treasury Yields Trade Edge Up Slightly Ahead of Fed Decision
1124 GMT - U.S. Treasury yields show little movement, edging just slightly higher ahead of the Federal Reserve's rate decision. The Fed is widely expected to leave rates on hold, though concerns are mounting over the economic outlook. "The U.S. economic policy uncertainty index has reached new highs not seen since the Covid pandemic in 2020," says Insight Investment's Stephanie Chan. Uncertainty mostly relates to new trade tariffs, both actual and threatened, placed by the U.S. on trade partners such as Canada, Mexico, Europe and China, the portfolio manager says. The 10-year Treasury yield rises 1 basis point to 4.293%, according to Tradeweb. The fed funds target range is expected to be left at 4.25%-4.50%. (emese.bartha@wsj.com)
Fed Might Adjust Quantitative Tightening to Avoid Swings in Reserves
1026 GMT - One area where policy adjustments might emerge at the Federal Reserve's meeting is the quantitative tightening program, says Tickmill Group's Patrick Munnelly in a note. Recent minutes highlighted the "potential for significant swings in reserves in the coming months" due to the looming debt ceiling issue. This could prompt the Fed to "consider pausing or slowing balance sheet reduction," the market strategist says. Any adjustment to the quantitative tightening program would likely be viewed as a cautious and dovish signal from the Fed, he says. (emese.bartha@wsj.com)
Euro Credit Default Protection Costs Steady Ahead of Fed Rate Decision
0949 GMT - The cost of insuring euro credit against default using credit default swaps is steady as investors trade cautiously ahead of Wednesday's U.S. Federal Reserve interest rate decision. Markets price in a 99% chance of the Fed keeping interest rates unchanged, LSEG data show. "The Fed's forward guidance and any mention of uncertainty around fiscal and trade policies will be closely scrutinized," ActivTrades analyst Anderson Alves says in a note. The iTraxx Europe Crossover index, which tracks euro junk bond credit default swaps, is steady at 304 basis points, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
Fed Decision Could Determine if U.S. Treasury Yields Fall Further
0903 GMT - The Federal Reserve's decision Wednesday will be important in determining whether U.S. Treasury yields fall further near term, MUFG's Lee Hardman says in a note. Treasury yields have stabilized in recent days, having dropped to their lowest levels since October earlier this month. Data showing rising U.S. import prices helped prop up yields ahead of the decision. However, the Fed could also stress risks to growth, the senior currency analyst says. The Fed is expected to leave the fed funds target range at 4.25%-4.50%. MUFG only expects a modest upward revision to inflation forecasts. U.S. two- and 10-year Treasury yields edge up around 1 basis point to 4.050% and 4.291%, respectively, Tradeweb data show.(emese.bartha@wsj.com)
Bitcoin Rises Slightly Ahead of Fed Decision
0836 GMT - Bitcoin edges higher but remains stuck in a range ahead of the Federal Reserve's policy decision later. The Fed is expected to keep interest rates on hold in a decision at 1800 GMT. Policymakers won't want to "rock the boat" with Fed Chair Jerome Powell likely to reiterate that the Fed is in no rush to cut interest rates further, Pepperstone strategist Michael Brown says in a note. The updated economic projections could raise inflation expectations and lower growth forecasts due to President Trump's tariff policies, he says. However, the latest rate projections should be largely unchanged, he says. This "shouldn't move the needle too much from a market perspective." Bitcoin rises 1.7% to $83,386, according to LSEG. (renae.dyer@wsj.com)
Dollar Recovers Slightly Ahead of Fed Decision
0756 GMT - The dollar recovers marginally after hitting a five-month low Tuesday ahead of the Federal Reserve's interest-rate decision at 1800 GMT. The Fed is expected to keep rates unchanged but the focus is on its messaging, updated rate projections and latest growth and inflation forecasts. Investors are "explicitly wishing" to hear the Fed is ready to step in if the market selloff worsens, Swissquote Bank's Ipek Ozkardeskaya says in a note. If the Fed signals more rate cuts than previously anticipated, equities and the dollar could rise slightly, she says. A cautious stance on rate cuts would weigh on equities and the dollar, she says. The DXY dollar index rises 0.3% 103.518 after hitting a low of 103.197 on Tuesday. (renae.dyer@wsj.com)
U.S. Treasury Yields Trade Barely Changed as Fed Decision Awaited
0715 GMT - U.S. Treasurys are little changed ahead of the Federal Reserve's widely expected decision to keep interest rates on hold, but yields have some more room to fall, says Pepperstone's Michael Brown in a note. "I still like bonds higher/yields lower here, particularly as growth expectations continue to re-rate lower, and policy uncertainty persists," the senior research strategist says. He expects the Fed policymakers not to 'rock the boat,' by issuing a broadly similar statement to that at the previous meeting. He also expects Fed Chair Jerome Powell to repeat that the FOMC is in no hurry to cut interest rates. The 10-year Treasury yield rises 1 basis point to last trade at 4.292%, while the 2-year yield is flat at 4.044%, according to LSEG data. (emese.bartha@wsj.com)
Fed to Stay on Hold; Risks to Inflation, Employment Seen Rising
0655 GMT - The Federal Reserve likely holds tight here, says Global X's Scott Helfstein ahead of the Fed's monetary policy decision on Wednesday. Fed Chair Powell has repeatedly said that the risks to price stability and full employment are balanced, the head of investment strategy says. "That is likely still true, but risks to both are rising," he says. This is not time to sell and go away, but perhaps time to review long-term strategy against near-term volatility, Helfstein says. Money markets fully expect the Fed to keep the fed funds target range at 4.25%-4.50%, according to LSEG data. The 10-year U.S. Treasury yield rises 1.5 basis points to last trade at 4.296%, according to LSEG data. (emese.bartha@wsj.com)
Powell Must Strike a Balance in Press Conference
1408 ET - Jerome Powell has a tightrope to walk on Wednesday when the Fed chair holds his post-meeting press conference, Jackson Garton, chief investment officer at Makena Capital Management, tells The WSJ. In recent remarks Powell has stuck to a glass-half-full view of the economic situation, emphasizing that activity remains solid and that the Fed can take its time making policy adjustments. But policy uncertainty and the burgeoning trade war have clouded the picture and dimmed consumer sentiment in surveys, something Powell must at least acknowledge, Garton says. "If Powell is wavering, I think that would cause some concern," Garton says. "But if he doesn't acknowledge [the risks], it would be like, 'Wait, what?' You have to acknowledge it and not ignore it, but it would be surprising to me if he overplayed it." (matt.grossman@wsj.com; @mattgrossman)
Fed Likely to Cut GDP Forecast, Raise Inflation Projection
1559 GMT - The Federal Reserve is expected to downgrade its 2025 GDP forecast, raise inflation projections and acknowledge increased uncertainty when it announces a decision on Wednesday, says Pictet Wealth Management's Frederik Ducrozet in a note. The Fed is expected to keep interest rates unchanged and Chair Jerome Powell is likely to reiterate that there's no rush to cut rates. The 'dot plot' of policymakers' interest-rate projections is anticipated to show an unchanged median projection of two rate cuts this year, with risks skewed towards one cut, the head of macroeconomic research says. Pictet WM expects one rate cut from the Fed in June and no further cuts in 2025 due to re-accelerating inflation. (emese.bartha@wsj.com)
Fed to Cut Interest Rates Maximum Twice This Year
1431 GMT - The Federal Reserve will make one or two interest-rate cuts by the end of the year, Federated Hermes' Deborah Cunningham says in a note. The next Fed rate cut is likely in May, followed by a second--if this is needed--towards the end of the year, the chief investment officer for global liquidity markets says. "That is a real departure from where we were after the September meeting, when the Fed cut 50 basis points and the back end of 2024," she says. This reflects persistent inflation and a resilient consumer, Cunningham says ahead of the Fed's policy meeting Wednesday. (emese.bartha@wsj.com)
Fed Officials Expected to Project Higher Inflation, Lower Growth
1200 ET - Fed official's economic projections will likely show an increase on inflation forecasts and a decrease in growth prospects, Goldman Sachs' economists write. Goldmansees the median economic projections on 2025 core PCE inflation rising by 0.3 percentage point to 2.8%. GDP will likely see a 0.3 p.p. downgrade to 1.8%, mainly reflecting the tariff news. They expect the Fed's leadership to favor interest rates projection steady at two cuts, given the markets turbulence stemming from tariffs uncertainties. The projections will be released Wednesday with the Fed's interest rate decision, which is expected to be a hold. (paulo.trevisani@wsj.com; @ptrevisani)
Fed Is Set to Stay on Hold, Reinforce Data-Dependent Approach
1355 GMT - The Federal Reserve is set to leave interest rates on hold this week despite significant uncertainty in the U.S. economic outlook, Paolo Zanghieri at Generali Investments says in a note. "The extreme uncertainty triggered by the first moves of the new U.S administration poses downside risks for employment and upside risks for inflation in an economy," the senior economist says. The U.S. economy still shows healthy domestic demand and persistent inflation, which should reinforce the Fed's data-driven approach, he says. "We believe this will allow the Fed to continue to pause in rate cuts at the upcoming Wednesday meeting, indicating two rate cuts this year," Zanghieri says. (emese.bartha@wsj.com)
Fed Might Refrain from Interest-Rate Cuts in 2025
1123 GMT - Lazard continues to expect no interest-rate cuts from the Federal Reserve through 2025 due to inflation risks, says chief market strategist Ronald Temple. Lazard's view significantly differs from the market consensus which prices in a possibility of three cuts this year, he says. "My out-of-consensus view is driven by my expectation that U.S. tariffs will broaden in scope and scale raising inflation through 2025," Temple says. A reacceleration of inflation will not necessarily lead to interest-rate hikes, but rising price pressures could preclude the Fed from easing policy even as unemployment rises, he says. (emese.bartha@wsj.com)
Fed to Spare Markets From Surprises But Could Comment on Impact of Trump's Policies
0957 GMT - The Federal Reserve typically keeps surprises to a minimum to limit any drama in the subsequent press conference, BNY Investments' Vincent Reinhart in a note. At Wednesday's policy decision the Fed is expected to keep interest rates on hold and await more clarity on the impact of President Trump's tariffs on the U.S. economy. Still, the Fed is likely to comment on the new administration's policies. "This is the first time that the Fed will be explicit about some of the consequences it expects from White House policies," the chief economist and macro strategist says. The Fed is widely expected to leave rates unchanged on Wednesday. (emese.bartha@wsj.com)
Risks Tilted Toward Delayed Fed Rate Cuts This Year, Barclays Says
0136 GMT - The Fed is expected to keep policy rates unchanged this week, but Barclays economists caution that tariff shocks could be more significant than what the FOMC will show in its summary of economic projections. "We see risks tilted toward delayed rate cuts this year," they say in a research note. Barclays expects the Fed's summary of economic projections to show higher inflation and unemployment projections, and lower GDP growth, but the Barclays economists anticipate a sharper slowdown in GDP and a larger pickup in inflation than in the SEP. "Even though we expect the SEP to show one cut this year, we retain our call that the committee will ultimately lower rates 25bp twice this year, in June and in September," they add. (monica.gupta@wsj.com)
(END) Dow Jones Newswires
March 19, 2025 11:15 ET (15:15 GMT)
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