US | Powell doesn’t think a March rate cut is likely

Summary

The Fed is moving further away from its long-held tightening bias as it explicitly conveyed that “the risks to achieving its employment and inflation goals are moving into better balance.”

Key points

• Key points:
• The FOMC kept the fed funds rate unchanged at 5.25-5.50%, and hinted through its policy statement that the rate-cut cycle is not likely to start in March.
• It “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
• Chair Powell reinforced such a signal by explicitly stating that the FOMC was unlikely to reach a sufficient level of confidence by March to deliver its first rate cut.
• The odds of a rate cut in March moved down sharply as a consequence and now stand at around ⅓ after hovering around 50% over the past few days.
• We continue to expect the rate cut cycle to start in May. Today’s meeting increased the odds of this outcome.

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