It is officially Fed Day. Interestingly, the primary question does not revolve around what action the US Federal Reserve will take regarding rates, as the market has priced the probability of a change, specifically a cut, at a de minimis 3%. Rather, the spotlight is firmly on how central bankers choose to describe the economic outlook and the associated policy implications.

Regarding the press conference scheduled to follow the release of the FOMC statement, the context is significant. This event marks Chair Powell’s first public appearance following his release of a defiant video in which he accused the Administration of leveraging a DOJ investigation to compromise Fed independence and force rate cuts. This represents a shift, as Powell had historically sidestepped political questions in the past.

There is one additional point to consider. Following May, and depending on the individual selected to replace Chair Powell, the strategy the Fed employs for balance sheet management may ultimately matter more to the economy and markets than the trajectory of rates.

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