The big thing that the market is honed in on right now is whether the Fed will hike rates by 50 bps in March.
There's plenty of talk of emergency action and what not but I would argue that the context matters. As mentioned yesterday, central banks are put in a rather unenviable position when it comes to the inflation debate. They don't have the right tools to deal with the surge in price pressures so even if the Fed does act in between meetings, does that really help? I'd say no.
It's all about the illusion and policymakers can only do that by buying as much time as they can, not trying to speed things up.
Not only that, a move to act in between meetings without any foreshadowing would be a disaster in policy management and that would introduce an unwanted bout of volatility into the market. If there's one thing the Fed has preached over the years, it is that they want to keep volatility to a minimum.
That means laying out the right expectations and also hand-holding the market into every decision they are about to make.
I would argue this time is no different. Hence, the key question now is how will policymakers seek to guide the market in the next few weeks. The FOMC blackout period will begin on 5 March so that leaves about three more weeks for the Fed to get their message across. I would be surprised if they would want to keep the market guessing but we'll see.