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RPT -- 🏦❗️Cable FX Macro Weekly Note: FOMC March Rate Decision

**As seen in Risk In The Week report 03/17/24, subscribe at cablefxm.co.uk/reports


The FOMC left the federal funds rate target unchanged at 5.25%-5.50% in the late January meeting, economists expected no change in policy while the event followed a fresh batch of macroeconomic forecasts in December. The meeting preceded stronger-than-expected January and February employment and price data, this is worth mentioning as expectations could have shifted since January, however, the board seems to hold an easing bias into 2H 2024. Last week, market pricing trimmed Fed rate cut bets to less than 75bps for 2024, the docket held PPI and CPI data. Regardless, Fed Chair Powell has recently said that it is likely appropriate to cut rates at some point this year. Perhaps, the strength in 1Q is likely to fade over the next couple of months, then it makes sense for the Fed not to react on a data point and leave the dots unchanged from December.

Out of consensus, the desk at Nomura expects the Fed to deliver only two rate cuts this year with the first reduction in July. Nomura had previously expected three rate cuts in July, September, and December. The median survey shows economists expecting 100bps of easing this year, according to data compiled by Bloomberg. HSBC, BofA, Rabobank, and Barclays stand in line with Nomura's call of only two 25bps rate reductions in 2024.

A suppression of volatility across asset classes says that Wednesday may not matter much and any move in currencies may not be long-lasting. Monetary policy is expected to ease on both sides of the pond anyway. The source of risks could be 6 months ahead in the curve as we head into the U.S. election, we have previously noted option skewness widening after the 3m tenor.



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