- US stocks were firmer and rose to highs in the wake of the latest FOMC rate decision in which the Fed left rates unchanged at 4.25-4.5%, as expected, with the dot plots unchanged, growth forecasts cut, and 2025 unemployment and inflation projections raised, while it announced to slow the pace of the balance sheet runoff. In the presser, Fed Chair Powell largely stressed a wait-and-see approach and said they are not in a hurry to cut rates, even when quizzed about cutting in May, as he stressed several times there is a lot of uncertainty ahead, and to bear that in mind when digesting Fed forecasts.
- USD was largely firmer against peers although gains were trimmed following the Fed announcement in which it kept the FFR unchanged as expected at 4.25-4.50% and decided to slow the pace of the balance sheet run-off on Treasury securities with the decision on rates made unanimously although Fed's Waller preferred to continue the current pace of decline in securities holdings. Furthermore, the dot plot projections showed forecasts for the FFR were kept unchanged but GDP forecasts were downgraded, while Fed Chair Powell reiterated at the presser his no hurry to cut rates rhetoric from the last press conference in January.
- Looking ahead, highlights include New Zealand GDP, Australian Jobs Data & Unemployment Rate, PBoC Loan Prime Rates, Supply from Australia, Japanese Holiday Closure.
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LOOKING AHEAD
- Highlights include New Zealand GDP, Australian Jobs Data & Unemployment Rate, PBoC Loan Prime Rates, Supply from Australia, Japanese Holiday Closure.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were firmer and rose to highs in the wake of the latest FOMC rate decision in which the Fed left rates unchanged at 4.25-4.5%, as expected, with the dot plots unchanged, growth forecasts cut, and 2025 unemployment and inflation projections raised, while it announced to slow the pace of the balance sheet runoff. In the presser, Fed Chair Powell largely stressed a wait-and-see approach and said they are not in a hurry to cut rates, even when quizzed about cutting in May, as he stressed several times there is a lot of uncertainty ahead, and to bear that in mind when digesting Fed forecasts.
- SPX +1.08% at 5,675, NDX +1.30% at 19,737, DJI +0.9% ar 41,965, RUT +1.57% at 2,082.
- Click here for a detailed summary.
FOMC
- Federal Reserve kept rates unchanged at 4.25-4.5%, as expected in a unanimous decision, while it announced the Fed will slow the place of the balance sheet runoff with the monthly Treasury redemption cap to decline to USD 5bln from USD 25bln, while the monthly redemption cap on MBS was unchanged at USD 35bln. There was one dissent from Fed Governor Waller, who supported no change in the policy rate but preferred no change to the balance sheet runoff. Fed said the economy continues to expand at a solid pace but added that uncertainty around the economic outlook has increased (prev. "The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance" has been removed), while the Fed dot plots showed FFR projections were kept unchanged with 2025 at 3.9% (exp. 3.875%, prev. 3.9%), 2026 at 3.4% (exp. 3.500%, prev. 3.4%), 2027 at 3.1% (exp. 3.125%, prev. 3.1%) and Longer-Run at 3.0% (exp. 3.125%, prev. 3.0%). Furthermore, the Fed lowered its GDP projections with 2025 seen at 1.7% (prev. 2.1%), 2026 at 1.8% (prev. 2.0%), 2027 at 1.8% (prev. 1.9%) and the longer-run kept at 1.8% (prev. 1.8%), while the Unemployment Rate forecast was raised for 2025 to 4.4% (prev. 4.3%) but maintained for the rest of the projection horizon, while PCE Inflation view was raised for 2025 to 2.7% (prev. 2.5%) and 2026 to 2.2% (prev. 2.0%).
- Fed Chair Powell said the Fed made a technical decision to slow the pace of the decline in the balance sheet and recent indications point to a moderation in consumer spending and surveys show heightened uncertainty, while he added it remains to be seen how uncertainty will affect outlook. Powell said PCE prices likely rose 2.5% in February and core PCE prices probably rose 2.8%, as well as noted that inflation expectations have recently moved up, with tariffs as a driving factor. Powell said the new administration is implementing significant policy changes and the net effect is what will matter, while he also stated that uncertainty around policy changes and the economic effect is high. Furthermore, he said they do not need to be in a hurry and will await further clarity with uncertainty unusually elevated and policy is not on a preset course.
- Fed Chair Powell said during the Q&A it will be difficult to know how much inflation is from tariffs and that goods inflation moved up and trying to track that back to tariff increases is challenging but clearly tariffs are a part of it. Powell noted solid hard economic data but added that inflation has started to move up, partly in response to tariffs and there may be a delay in further inflation progress this year. Powell said that on balance, people wrote down similar forecasts to last time and it is hard to know how this will work out, while policy can move in the direction they need it to and it is appropriate to wait for further clarity, and costs of waiting are very low. Powell also stated that forecasts point to weaker growth and higher inflation, which call for different responses and cancel each other out, while the unemployment rate only rose a tenth, so there ultimately has not been a big change in forecasts. Furthermore, Powell said they are at a place where they can cut, or hold at what is clearly a restrictive stance of policy, as well as repeated the Fed is not going to be in any hurry to move on rate cuts and regarding the balance sheet, he said they looked at pausing and slowing, although people came to be strongly in favour of slowing the balance sheet shrinkage.
TARIFFS/TRADE
- US President Trump's aides are planning new tariffs on “trillions” more of imports on April 2nd, according to Washington Post.
- White House economic advisor Hassett said he spent last night with the Commerce Secretary and the Treasury Secretary negotiating with other countries about mutually lowering tariffs ahead of the April 2nd reciprocal tariff deadline.
NOTABLE HEADLINES
- White House Economic Adviser Hassett sees the Fed weighing a shift to cruise control in meetings and said the Fed is likely a little tighter than equilibrium right now.
FX
- USD was largely firmer against peers although gains were trimmed following the Fed announcement in which it kept the FFR unchanged as expected at 4.25-4.50% and decided to slow the pace of the balance sheet run-off on Treasury securities with the decision on rates made unanimously although Fed's Waller preferred to continue the current pace of decline in securities holdings. Furthermore, the dot plot projections showed forecasts for the FFR were kept unchanged but GDP forecasts were downgraded, while Fed Chair Powell reiterated at the presser his no hurry to cut rates rhetoric from the last press conference in January.
- EUR was pressured amid early dollar strength but bounced off lows and just about reclaimed the 1.0900 status.
- GBP ultimately returned to flat territory against the dollar ahead of Thursday's BoE announcement and with Chancellor Reeves to announce the biggest spending cuts since austerity at next week’s Spring Statement.
- JPY strengthened with USD/JPY slipping to sub-149.00 territory as US yields softened post-FOMC.
FIXED INCOME
- T-notes gained with a surge seen after the Fed announced a slowdown to the balance sheet runoff from April.
COMMODITIES
- Oil prices eked mild gains and settled off highs as participants continued to digest Ukraine/US geopolitics.
- US EIA Weekly Crude Stocks w/e 1.745M vs. Exp. 1.1M (Prev. 1.448M)
- German official said the EU Commission President will present the plan for phasing out Russian fossil fuels, so no reason to discuss reintroducing them.
GEOPOLITICAL
MIDDLE EAST
- IDF officially confirmed that Israeli forces have initiated a focused ground operation in the central and southern Gaza Strip, while the goal is to expand the security perimeter and create a partial barrier between the northern and southern parts of the Gaza Strip.
- US President Trump said Iran is still sending Houthis large levels of supplies and must stop sending supplies to the Houthis immediately, while it was reported that strikes hit a Houthis stronghold in Yemen's Sanaa. In relevant news, President Trump's letter to Iran's Supreme Leader Ali Khamenei included a two-month deadline for reaching a new nuclear deal, according to Axios citing sources.
RUSSIA-UKRAINE
- US President Trump said he had a very good call with Ukrainian President Zelensky which lasted for around one hour with much of the call based on the call with Russian President Putin and in order to align both Russia and Ukraine in terms of their requests and needs. Trump added that they are very much on track and he will ask Secretary of State Rubio and National Security Advisor Waltz, to give an accurate description of the points discussed.
- US Secretary of State Rubio and National Security Advisor Waltz are to be in Jeddah, Saudi Arabia on March 23rd for Russia-Ukraine discussions, according to CBS.
- US National Security Advisor Waltz spoke with his Russia counterpart Ushakov on the US's efforts to end the war in Ukraine, while they agreed that technical teams would meet in Riyadh in the coming days to focus on implementing and expanding the partial ceasefire secured from Russia.
- US Envoy Witkoff said the Putin-Trump call was epic and a full-on ceasefire in Ukraine is more complicated, while he notes he understands energy assets are off limits as of today. Witkoff said he thinks they can get to a full-on ceasefire in a couple of weeks, while he added the meeting between US President Trump and Russian President Putin is likely to happen and they did not discuss sanctions specifically.
- Ukrainian President Zelensky said he had a 'frank and substantial' talk with US President Trump and Trump informed him about the call with Putin, while they agreed that Ukraine and the US should continue working together to achieve a real end to the war and lasting peace. Zelensky added that one of the first steps toward fully ending the war could be ending strikes on energy and other civilian infrastructure which they support and Ukraine confirmed it is ready to implement.
- Ukrainian President Zelensky said he hopes a ceasefire will eventually be implemented and Russian President Putin's words are at "odds with reality" in relation to the halt on energy strikes. It was separately reported that Zelensky backs the proposal to halt energy assets strikes and that Zelensky and Trump discussed the partial ceasefire in the call, while Zelensky separately commented that Russian President Putin will be looking for any possibility to avoid a full ceasefire and hopes Trump will increase sanctions pressure on Russian individuals.
- Russian President Putin said Russian troops are completing the defeat of Ukrainian forces in the Kursk region.
- Russia's Kremlin said Russia and the US are determined to normalise ties "step-by-step" and that Ukrainian attacks on Russian energy infrastructure show Kyiv's lack of will to reach a deal. Furthermore, the exact dates and format for the next contacts will be agreed on Wednesday and Thursday, while it was noted that Russian President Putin and US President Trump "understand each other well and trust each other".
- Russian Defence Ministry said Ukraine attacked Russia's energy infrastructure overnight, while the CPC Kropotkinskaya oil pumping station stopped operating after damage, according to TASS.
- Finland President Stubb said if Russia refuses to agree, will need to increase its efforts to strengthen Ukraine and ratchet up pressure on Russia to convince it to come to the negotiating table.
ASIA-PAC
NOTABLE HEADLINES
- Chinese battery makers CATL and BYD are targeted for new restrictions in the US under legislation that would bar the Homeland Security Department from procuring clean energy technology made by six companies, according to Nikkei Asia.
- China's Vice Commerce Minister met with Vale’s (VALE) CEO in Beijing, according to Reuters citing a Commerce Ministry statement.
EU/UK
NOTABLE HEADLINES
- UK Chancellor Reeves will reportedly not be making any tax changes next week in her Spring statement, according to The Guardian's Crerar. Furthermore, Reeves previously said she wouldn’t extend a freeze on the income tax threshold although sources added this hasn’t been ruled out but it would be at the Autumn Budget.
- ECB's de Guindos said European defence spending increases are the number one priority, but budget stability also needs to be guaranteed.
- EU is reportedly to tighten steel import quotas as of April 1st to reduce inflows by 15%, according to Reuters citing sources.
- Germany’s Finance Minister informed the Budget Committee of an expected approval of just over EUR 2.6bln in military aid for Ukraine, according to a source cited by Reuters.
DATA RECAP
- EU HICP Final MM (Feb) 0.4% vs. Exp. 0.5% (Prev. -0.3%)
- EU HICP Final YY (Feb) 2.3% vs. Exp. 2.4% (Prev. 2.4%)
- EU Wages In Euro Zone (Q4) 4.1% (Prev. 4.4%, Rev. 4.3%)
- EU Labour Costs YY (Q4) 3.7% (Prev. 4.6%, Rev. 4.5%)
