📝FOMC March Meeting Seen As A 'Close Call': Wells Fargo

Both SVB and Signature Bank had some unique characteristics that made them particularly susceptible to a bank run. However, the failures brought to light the risks to financial stability that lurk behind the most aggressive monetary policy tightening in four decades. The FOMC was already performing a delicate dance by trying to rein in inflation without inflicting undue harm on the labor market.

Whether or not the FOMC will proceed with policy tightening at its March meeting is not an easy call. Recent economic data clearly argue for at least another 25 bps rate hike. Not only does inflation remain well above target, but the underlying trend appears even higher than when the FOMC concluded its last meeting

A 25 bps rate hike at the March 22 meeting is clearly on the table, and other outcomes, such as a rate hike but a pause to quantitative tightening, strike as plausible, albeit less likely.

We suspect the statement will include new language that references recent events but expresses confidence in the financial system and calls for additional monetary policy tightening to ensure the inflation fight is seen through to its conclusion.

Looking ahead, we forecast that the FOMC will resume its tightening cycle in subsequent meetings with a 25 bps hike on May 3 and a final 25 bps increase on June 14.

- Wells Fargo