TD Securities economists analyze the Federal Reserve's interest rate decision and its implications for the Bloomberg Dollar Spot Index.
Hardline (35%)
The Fed pauses but maintains a policy stance with the option to keep rates high for longer, if necessary, as the economy has shown no clear signs of normalization. 2024 dot chart rises and Fed increases long-term dots. Chairman Powell mentions that policy will likely need to remain tight for longer until there are clearer signs that inflation will remain at the 2% target. BDXY +0.35%.
Base case (60%)
The Fed decides to maintain rates, and the Committee maintains the stance of monetary policy practically unchanged in the statement. The 2024-2026 dot chart does not change, but the long-term dots go up. The Fed outlines a plan to reduce quantitative tightening (QT) and suggests that tapering will begin soon. We expect Chairman Powell to maintain a cautious stance as he tries to avoid sending strong signals ahead of the May meeting. BDXY -0.20%.
Moderate (5%)
The Fed pauses, but also clearly acknowledges in the statement that “the risks to achieving its employment and inflation goals have moved toward a better balance.” The monetary policy stance is modified to signal that the Committee is about to be fully confident that inflation is “sustainably moving” towards the 2% target. All points on the graph remain unchanged. With monetary policy still very restrictive, the chairman anticipates that the Fed could consider the idea of a gradual, pre-emptive rate cut in the near future. BDXY -0.50%.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
