Wednesday’s Fed meeting had four big takeaways. The Fed is projecting no rate hikes this year, down from two at the December meeting. And the Fed will end the runoff of its balance sheet in September, a little earlier than most had anticipated. The dovish tilt that began in January continues.
In addition, the Fed kept its key rate at 2.25-2.50% as expected. Finally, Fed Chief Jerome Powell says he expects “solid growth” this year, though the Fed downgraded the economic outlook.
While the Fed says it wants to maintain today’s rates, investors are trying to sniff out a rate cut this year amid the slowdown in the global economy and its possible impact at home.
Take a look at Figure 1. As of March 22, investors were pricing in more than a 50% chance of at least one rate cut this year and a 43.7% chance rates will remain unchanged.