**As seen in Risk In The Week report 04/28/23, subscribe at cablefxm.co.uk/reports
Back in March, the Fed raised the benchmark rate by 25 bps to the 4.75%-5.0% target range, this was in line with market expectations. Pricing shifted dramatically on the banking crisis developments, not only a 50bps hike in March was scrapped but rate cuts as soon as this year were discounted. The meeting came with a fresh batch of forecasts from the Fed, the median projection saw rates at 5.1% by end of 2023 and at 4.3% by end of 2024, this came to break the precedent trend of upward revisions in the median dot plot, now dot projections for 2023 are unchanged from December. Also, the Fed said it had considered a pause for March, however, a hike was supported by strong consensus. On the banking crisis, the board said that U.S. banks remain resilient, but the events from March were seen as likely to weigh on growth. A less dovish note could have been taken from Powell signaling that Fed officials do not see rate cuts this year, he also said that they were ready to take rates higher than expected if necessary. Analysts at Rabobank expect the Fed to remove the “some additional policy firming” language from the statement, as it is likely to pause hikes and signal a hold on rates after May. Rabo expects the Fed to deliver a final 25bps hike on Wednesday and added that only a deterioration in the First Republic events could stop the FOMC from hiking, this would delay the move to June.
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