Markets will be focused on the FOMC Interest Rate Decision and Policy Statement this afternoon

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Published Date 3/20/2024

FOMC meeting at 2 pm ET, Powell’s press conference at 2:30 pm. At the meeting, the Fed will release its quarterly projections for inflation, employment and economic growth covering two years out. The last time the quarterly outlook was released at the December FOMC meeting the interpretation was six rate cuts this year with the first cut coming at this FOMC meeting, since then those projections went into the dumpster as inflation has remained strong and the economy firm. From six to three cuts as the year has progressed. From the December meeting the 10 year note yield has moved higher with incoming inflation data refusing to slow. The 10 at the beginning of the year 3.80%, now 4.30%.

Traders have upped their belief the Fed will do three cuts, and even that is questionable with some talk of no rate cuts this year. In the December quarterly projections, the Fed looked for inflation at 2.5% into 2025. Since the beginning of this month the bullish view of rate cuts has been reduced substantially, according to data from the CFTC net long positioning in Treasury futures, it is now at its lowest since July 2023. A few days back we noted a comment from an ECB official, that the ECB may have to lower rates even as inflation is above its 2.0% goal, not implying anything but it was an unusual remark that went unnoticed (Europe’s economies not as firm as the US).

After two strong increases in weekly MBA mortgage applications, last week apps declined. The composite index -1.6% from +7.1% the prior week, purchase apps -1.2% from +4.7%, and re-finance apps -2.5% from +12.2%.

At 9:30 am the DJIA opened -88, NASDAQ +37, S&P unchanged. 10 year 4.29% -1 bps. FNMA 6.0 30 year coupon at 9:30 am +4 bps from yesterday’s close and +11 bps from 9:30 am yesterday.

Source: TBWS

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