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Morgan Stanley expects both the Fed and the BoJ to stay on hold at their March meetings. The FOMC will maintain its policy rate, with Powell likely reiterating a patient stance on rate cuts. However, the Fed’s perception of downside growth risks is expected to increase. Meanwhile, the BoJ is also expected to keep rates unchanged, with Governor Ueda likely to highlight global economic uncertainty.
Key Points:
FOMC Outlook (March 20) 🇺🇸
1️⃣ Fed to Keep Rates Steady, Powell to Stress Patience 🏦
- No change in policy, in line with market expectations.
- Powell will likely repeat that the Fed is not in a hurry to cut rates.
2️⃣ Rate Path Expected to Stay Unchanged 📊
- 2024 year-end Fed funds rate forecast: 3.875%.
- 2025 forecast: 3.375%.
3️⃣ Growth Risks Shifting to the Downside 📉
- FOMC may acknowledge rising risks to GDP growth.
- This could lay the groundwork for a more dovish stance later in the year.
BoJ Outlook (March 19) 🇯🇵
1️⃣ BoJ to Hold Rates, No Immediate Policy Shift Expected 🏦
- No change in rates expected at this meeting.
- The BoJ remains cautious amid global economic uncertainty.
2️⃣ Governor Ueda to Highlight Global Risks 🌍
- BoJ will likely emphasize uncertainty in global growth and inflation trends.
- This suggests patience before considering further policy changes.
Conclusion:
Morgan Stanley sees both the Fed and BoJ remaining on hold in March, with the Fed shifting focus to downside growth risks and the BoJ maintaining a cautious stance. Powell will likely stress that the Fed is in no rush to cut, while Ueda will highlight global uncertainty, reinforcing the BoJ’s patient approach.
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