Fed will not change their patient stance – Nordea Markets

According to Kjetil Olsen, analyst at Nordea Markets, the US Fed will not change their patient stance next week, and they don’t think Powell will even try to rock the boat at the press conference.

Key Quotes

“We and the market will focus on new views on inflation and inflation expectations.”

“The U.S. economy is according to the Fed “in a good place and operating close to both of the Federal Reserve’s dual-mandate objectives of maximum employment and price stability”.”

“Since the 19-20 March meeting, growth in the US economy in Q1 seems to have held up better than anticipated by the Fed, there are green shoots globally and risky asset has continued to gain.”

“On the international front, uncertainties prevail, and it is still a question whether green shoots continue to grow. If not, investor sentiment could turn again and tighten financial conditions. We therefore think it is to early for the Fed to conclude.”

“Inflation is still muted and the latest reading for core CPI (at 2.0% y/y) was if anything on the downside of expectations. The majority of the FOMC seems to have been more focused than before and more willing than before to let inflation overshoot the target of 2%, raising the bar for further rate hikes.”

“Overall, we think the Fed still feel they are at a good place and don’t think they will want to signal a different view on policy going forward. Market reactions should therefore be muted. As there are no new forecasts and the statement is short, focus will be on the press conference. We and the market will particularly look for any new views on inflation and inflation expectations and the discussion around overshooting.”