Federal Reserve Monetary Policy Preview: Reliance Securities

Reliance Securities Report

There are two possible scenarios and the impact from the Federal Open Market Committee meeting outcome will depend on what the central bank broadcasts.

Scenario 1 (most likely Dovish pause)

• We expect the FOMC will opt to maintain key interest rates at current levels at the conclusion of its upcoming meeting on March 20.

• However, the focus isn’t on Wednesday afternoon’s decision for interest rates, but on what may happen months from now.

• The question is whether it will lower rates in June as the bond market currently expects, and how many cuts to expect in 2024.

• Hints about the timing and scope of rate cuts could come from the Fed’s so-called dot plots, a quarterly visual depiction of individual officials’ economic and interest rate forecasts.

Scenario 2 (Hawkish pause)

• It is very unlikely that the Fed could project three or more rate cuts in March due to elevated inflation.

• If indeed they mention three or more rate cuts, it will be bearish for the dollar index.

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