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Nordea Markets analysis team is expecting that in the upcoming March FOMC meeting, rates should be kept unchanged, while Chair Powell is likely to stick to “patience”.

Key Quotes                                  

“We expect the dot plot to migrate lower, but still with one hike later this year. QT details could be announced at the March meeting.”

“Based on recent speeches, we believe that at least half of the dots will have migrated lower, reflecting FOMC members’ reduced inclination to hike rates, with the median down to one hike this year (from two in December) and another hike in 2020 (unchanged from December).”

“Market sentiment has brightened and the FOMC may decide to keep the announcement about the details of the end of quantitative tightening (QT) for a rainy day, but some details could also be announced as early as next week.”

“Our baseline continues to be a QT tapering starting in Q3 and QT ending in Q4, with excess reserves around USD 1,000bn. It will be market-negative if the Fed announces that excess reserves will continue to drop after the end of QT.”