11 to 17 March: How dovish the Fed will be on Wednesday?

The decision-making body of the Federal Reserve reconvenes on Wednesday to discuss whether the current monetary policy stance is appropriate. Since it is a quarter-end, the FOMC will release an updated macroeconomic projection, which is very unlikely to reflect any changes compared with the previous ones released in last December. The update of the “dot plot”– which contains the rate expectations by voting and non-voting members – could serve as a catalyst for a shift market sentiment, but the persistence and magnitude of the sentiment shift are probably going to be moderate. What is really worth paying attention to is the post-decision press conference and Q&A by Chair Powell, where he might (or might not) discuss the details of the balance sheet run-down and could announce a date when it ends. Should the Chair clearly communicate that the end of the balance sheet adjustment process is nigh, global market sentiment could (further) improve boosting appetite for risky assets.

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