The Fed is expected to keep interest rates unchanged at 3.50-3.75% and maintain the neutral stance. There should be limited changes to the statement as the central bank awaits more data before considering further rate adjustments. Note, that we won’t get the SEP (Summary of Economic Projections) at this meeting, so the focus will be mainly on Fed Chair Powell. STATEMENTThe statement should acknowledge some of the recent developments in the economy. We could see an upgrade in the pace of economic activity from moderate to solid. They might acknowledge the improvement in the unemployment rate but also add that job gains remain subdued. They might also scrap the “moved up” when describing inflation developments.Overall, the market shouldn’t react to changes in this paragraph unless they are substantial and look like clear signals.The part about the federal funds rate will be revised of course to reflect no change in interest rates and they will likely maintain the part saying “in considering the extent and timing of additional adjustments” to reiterate their neutral stance and data-dependent approach. The part about the purchases of short-term Treasury securities will be removed as no longer needed, and lastly we should see only Miran dissenting in favour of a 25 or 50 bps cut. Potential surprises:Indicates that the labour market has stabilised – slightly hawkishBowman or Waller vote for a rate cut – dovishPRESS CONFERENCEThis is where we could get the real action. The baseline expectation is that Powell just reaffirms the neutral stance as they wait for more data before deciding on further rate adjustments. We shouldn’t really get anything new from him given the lack of meaningful changes in the macro picture since the December’s meeting.What I’m more interested about is whether he discloses his intention to remain on the board of governors until his term expires in 2028. Everytime he got asked about it, he declined to answer. This time he might kind of declare war to protect Fed independence.As a reminder, the US Department of Justice recently served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to Powell’s testimony before the Senate Banking Committee last June. That testimony concerned in part a multi-year project to renovate historic Federal Reserve office buildings.In an unpredented move, Powell released a statement and a video where he said that the threat of criminal charges was a consequence of the Federal Reserve setting interest rates based on the best assessment of what will serve the public, rather than following the preferences of the President.If asked again, Powell might unveil that he intends to stay until 2028 and the market could overreact to this information. It would be seen as a hawkish surprise and would undermine Trump’s plan. It’s something that even Bessent highlighted as a risk when he said they didn’t need a “shadow Fed chair”. In fact, whoever Trump picks as the next Fed chair, the markets will likely continue to focus more on Powell and the board as a whole rather than listening to the Chair. I think Powell would leave only if Waller gets the job. Otherwise, he might prefer to stay until 2028 when we will also get new US elections.MARKET PRICING98% probability of no change at today’s decision48 bps of easing expected by year-end62% probability of the next rate cut in June 2026BONUSThere’s a chance Trump decides to steal the show by announcing his Fed chair pick during the FOMC event. I don’t think it will matter if Powell unveils his intention to remain on the board, but without Powell’s decision it could trigger a market reaction. The finalists are Rieder, Warsh and Waller. Betting markets give Rieder as the favourite with Warsh a close second.Waller would be the best pick by far as Fed independence risks would ease substantially. His chances of convincing the other policymakers of voting alongside him are also the highest. I would expect the US Dollar to strengthen and precious metals to tumble. The stock market should also like the news even though Waller could turn hawkish in case the data improves. Bonds will likely rally with him.The other two contenders aren’t as great, but Rieder is seen as less prone to get influenced by Trump, so the market reaction might be similar although with lower magnitude. Warsh, on the other hand, is seen as a lackey despite being a hawk during his last term at the Fed. The Fed independence risks could remain even though I think they are exaggerated given that the Fed chair has just one vote. This article was written by Giuseppe Dellamotta at investinglive.com. 🔗 Source 💡 DMK Insight The Fed’s decision to hold rates steady is a pivotal moment for traders navigating interest-sensitive assets. With rates unchanged at 3.50-3.75%, the market’s focus shifts to upcoming economic data that could influence future decisions. This neutral stance signals a wait-and-see approach, which could lead to volatility in sectors like real estate and utilities that are sensitive to interest rates. Traders should keep an eye on inflation metrics and employment reports in the coming weeks, as these will be crucial for gauging the Fed’s next moves. If inflation remains stubbornly high, we might see a shift in sentiment, pushing rates higher sooner than expected. On the flip side, if economic indicators show weakness, it could bolster risk assets as the market anticipates a dovish pivot. Watch for key levels in the S&P 500 around 4,300 and 4,200; breaks below these could signal a bearish trend in equities as traders reassess their positions based on Fed guidance. 📮 Takeaway Monitor inflation and employment data closely; a shift in these metrics could impact Fed policy and market volatility significantly.

The interest rate decision today will be a straightforward one, with the Fed set to leave policy unchanged. There might be slight tweaks to the statement, with focus on the risks to the economy especially the labour market. As for forward guidance, that is likely to be maintained as per December.That leaves us with Fed chair Powell’s press conference and how he will want to communicate today’s decision. Will it be a dovish hold? Or perhaps he will try to be stubborn in his final few meetings in setting out expectations for a longer hold?The latter seems unlikely as the Fed would definitely like to retain optionality and flexibility. But in any case, the fact that the Fed won’t cut interest rates today will irk Trump and he may hit back by announcing his choice of Fed chair shortly after. So, be on the lookout for that.With the Fed not set to ease further today, what are the expectations moving forward though?Fed funds futures are pricing in ~48 bps of rate cuts for the year with the first full 25 bps rate cut priced in for July currently. Let’s see what analysts have to say about the Fed outlook.Barclays- 50 bps of rate cuts in 2026 (June and December)- “We expect the FOMC to… signal it is in no rush to cut rates further. We think it will indicate that it views downside risks to employment and upside risks to inflation as more balanced.”- Powell to reinforce the message the FOMC is in no rush to cut rates.BofA- 50 bps of rate cuts in 2026 (June and July)- “Politics may take center stage at the Jan FOMC meeting. The Fed is firmly on hold, and the balance of risk hasn’t changed.”- Powell presser “might be dominated by questions about politics rather than policy. On the latter, however, market pricing creates risks of a dovish surprise.”Citi- 75 bps of rate cuts in 2026 (March, July, and September)- “Over the course of this year, a soft labour market and cooling inflation mean the Fed will likely deliver more cuts than are priced into the market.”Goldman Sachs- 50 bps of rate cuts in 2026 (June and September)- “If the next cut is less urgent, aimed at normalisation rather than addressing an immediate risk, then the leadership will likely want it to be backed by a stronger consensus than the December cut was. Assembling a firmer consensus for the next cut will require more convincing progress on inflation.”- “Powell is likely to emphasise that the FOMC has just delivered three cuts that should help to stabilise the labour market and is well positioned for now while it assesses their impact.”JP Morgan- No rate cuts in 2026- “After three 25 bps risk management rate cuts in the second half of last year, many FOMC participants have expressed an opinion that now is a good time to pause.”- “Powell will indicate that policy is well-positioned to address risks to either of the Fed’s mandates, and we think he’ll avoid discussing the various political issues relating to the Fed.”Wells Fargo- 50 bps of rate cuts in 2026 (March and June)- “There is a sound argument that the longer the FOMC waits to cut, the higher the hurdle becomes to justify on economic grounds the need to ease further.”- “We do not expect Chair Powell to hint in the press conference that further easing is likely to come at the FOMC’s next meeting on March 18 given the range of participants’ views and the desire to keep options open. It is likely that Chair Powell will be asked about the DOJ’s investigation, but we expect him to respond that he has already said what he has to say on the matter.” This article was written by Justin Low at investinglive.com. 🔗 Source 💡 DMK Insight The Fed’s decision to keep interest rates unchanged is a non-event for traders, but the nuances in their statement could signal future volatility. With the labor market at the forefront, any hints of weakness could lead to shifts in market sentiment, particularly in sectors sensitive to borrowing costs. Traders should keep an eye on the language used regarding economic risks, as any change could impact equities and the dollar. If the Fed expresses concern, we might see a flight to safety, boosting gold and bonds while pressuring risk assets. Watch for the immediate reaction in the forex market, especially with the USD, which could face downward pressure if the Fed’s tone turns dovish. Key levels to monitor include the 1.05 mark for EUR/USD and 1.30 for GBP/USD, as these could indicate shifts in trader sentiment following the announcement. 📮 Takeaway Keep an eye on the Fed’s statement for hints on labor market risks; watch EUR/USD around 1.05 and GBP/USD near 1.30 for potential trading opportunities.