NEW YORK, March 18 - The U.S. Federal Reserve is widely expected to keep rates unchanged when it ends its two-day meeting on Wednesday, but policy makers could show more concern about stubborn inflation and present more hawkish signals about the timing and extent of any easing this year.
"What will be really interesting to see is if the Fed is still comfortable in the dot plots to still be showing the possibility of three rate cuts for this year," said Matt Eagan, head of the full direction team at Loomis, Sayles & Co."Or will they start to say we've got to push back against this a little bit longer."
Powell said after the Fed's January meeting that the central bank wants more confidence that inflation will continue to decline before cutting rates. Another possibility is that Powell could adopt a more hawkish tone by referencing loose financial conditions as stock markets hit records and corporate credit draws enthusiastic demand.
QT is meant to remove excess liquidity created by record bond purchases designed to stimulate the economy during COVID-related business shutdowns. So far QT has helped shrink the Fed's balance sheet to $7.5 trillion from a peak of around $9 trillion."In our calculations we've still got about $1 trillion worth of excess liquidity in the system," Garvey said.
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