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25bp Hike Likely Next Week, With Softer Fwd Guidance But No QT Shift

FED
We'll be publishing our full March Fed meeting preview on Monday. A brief look at our expectations for the decision, going into the weekend:
  • 25bp hike to 4.75-5.00%
  • Statement to soften "ongoing increases will be appropriate" to reflect "some further" increases "could/may" be appropriate. To acknowledge FOMC is monitoring financial sector stress but with confidence that banks are healthy
  • Possibility they don't publish a Summary of Economic Projections given heightened uncertainty, but that would likely be flagged in advance of the meeting. In any case SEP will carry even less policy signalling power than usual
  • SEP submissions' underlying assumption will be that banking sector turmoil will prove temporary, so will include a slightly higher 2023 Fed funds median (5.4% - implying an intention to hike a further 50bp - vs 5.1% in December's) with lower unemployment rate forecast
  • No change to QT policy (though we are starting to see analysts expecting an immediate end to QT next week). Slim chance of a dovish surprise with FOMC saying they would be “be prepared to adjust” the QT program in future should conditions warrant
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