On the March FOMC

Very much as we expected, the FOMC stood pat with almost no changes to the meeting statement, and no change to the 2024 dot – still at 4-5/8%, implying three rate cuts. Also as we expected the Fed has upgraded its conception of the neutral rate. We see this in the fact that while there are upgraded forecasts for growth and unemployment this year, there is no change to the inflation estimate. Powell wrote of hot January and February readings as driven by seasonal factors, much as we have argued. The “longer-run” dot was raised slightly, the first time above 2-1/2% in over five years. Powell acknowledged this was because of a version of our view that the post-GFC era of “secular stagnation” is over. Powell announced that slowing the pace of securities run-off with come “fairly soon,” and subject to further discussion. It will be a gradual process, to minimize market disruption. We don’t see this as significant, because we see “quantitative tightening” as something of a myth.