It's time to spin the wheel again in trading this week. All eyes are on the Fed to see what message will they deliver to markets about their future policy outlook. An eventual pivot seems imminent but will policymakers start hinting at that as early as this week? Or are we going to see them stick to the status quo for now?
The policy decision this week should be a dud as the Fed is expected to keep rates unchanged. There will be no economic projections accompanying the decision, so Powell's presser is the main thing to watch. In that lieu, it will come down to what he says on the outlook more than anything else.
As things stand, Fed funds futures are pricing in roughly 48% odds of a rate cut for March. If Powell is searching for a platform to push back against that, then this would be it. Otherwise, leaving it to a coin flip is not really one that will look too kindly on the Fed - even if they do want to retain some flexibility in the months ahead.
It will all come down to the data once again, should the Fed decide to stick to the status quo that is. And that will keep traders guessing for a few more weeks until we get closer to the March policy decision. A key question then would be, can markets bully the Fed into a decision? Or will policymakers eventually pick a side and guide markets accordingly?
There are still plenty of question marks up in the air but I guess we'll have to take things step by step, starting with this week's decision and Powell's press conference.
