Westpac:
The unchanged fed funds rate projection from December ā including 50bps of cuts forecast by end-2025, another 50bps in 2026 and one more cut come 2027 ā suggests that the changes in their view of the full spectrum of risks are largely offsetting. That said, it could still be argued that a 2027 forecast for the fed funds rate of 3.125%, a touch above their ālonger runā 3.00% view, implies inflation risks are still dominant in the minds of FOMC members.
Our modestly weaker growth view for 2025 warrants the two cuts forecast by the FOMC in 2025, but we then expect the Committee to hold at 3.875% as the effects of tariffs linger and capacity constraints also buoy consumer inflation. If we are correct, the FOMCās growth expectations are likely to be disappointed and risks will remain skewed to the downside. While this should see inflation pressures abate, progress is likely to be slow, and inflation may not travel all the way back to the 2.0%yr ālonger runā target over the next few years.
ING:
With the Fed still not signalling greater urgency to cut rates and the 2-year USD swap rate having moved only marginally lower compared to the past few days, we are not looking to change our dollar call. We expect a broad recovery in the greenback in April as US recessionary risk may not be fully endorsed by data while US tariffs throw cold water on European sentiment. The path forward points to a correction in the overvalued EUR/USD into the summer before making fresh attempts at a structural shift above 1.10 in late 2025.
Wells Fargo:
We look for 75 bps of easing by the end of the year, which we acknowledge is not a view that is currently shared by most FOMC members.
If the economic slowdown that we forecast eventually leads the FOMC to place more weight on the "full employment" objective of its dual mandate than on its "price stability" objective, then we believe the Committee will ultimately conclude that lower rates are warranted and commence an easing cycle this summer.
Nordea:
Reducing the speed of QT has been discussed by the Fed earlier, but this decision comes somewhat earlier than expected and is tied to the debt-ceiling impasse. Pulling the reducing forward by a few months should only have a marginal market impact on the Treasury market, we believe.
Overall, we got the impression that the Fed is not in a hurry to cut rates. We agree that the downside risks to the labour market is still not something to worry about. We place more weight on the upside risks to inflation and believe the bar to cut rates will stay high for the foreseeable future.
UBS:
If anything Powell sounds a unexpectedly sanguine to me when addressing longer-term inflation expectations, though that narrative fits the most nicely with leaving so much of the SEP/dots unchanged in the longer run. With that said, it feels like he wants to leave the door open for that view to change in the coming weeks/months. But so far this aligns with the relatively dovish vibe from the statement and SEP, maybe calming the waters for now when they don't have enough concrete information to react to anyway. I do find it interesting that at the moment the most reactive part of the SOFR strip is the red pack, which is up ~13bp from pre-announcement lows. From an options perspective that was already the biggest area of dovish focus, but it is a contrast to how the Fed is trying to message the duration of the tariff shock.
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