FOMC Preview: More wait and see

Expectations are for the FOMC to continue to sing their same tune.


The March FOMC meeting was highly anticipated.  Bonds yields around the world were rising, as were inflation expectations.  However, Fed Chairman Jerome Powell had indicated at the meeting that the rise in yields was due to confidence in the US recovery and that the Fed is not going to hike rates until the labor force has fully recovered and inflation is sustainably above 2%, which they don’t expect until 2023.  They want to see hard data, not forecasts. 

Everything you need to know about the Federal Reserve


Fast forward to April’s upcoming meeting on April 27th-28th.  Non-Farm Payroll data was hot in March, with the economy added 916,000 jobs to the economy. However, one data point does not equal a trend.  In addition, Initial employment claims are also at their lowest levels since the pandemic began over a year ago. However, there are still roughly 8 million jobs that have not been recovered since the onset of the coronavirus.


The rise in yields heading into the March meeting has plateaued and are no longer screaming higher.  The benchmark 10-year yield is trading near 1.57%, vs a March 31st high of 1.774%.  Inflation was not a concern at the March meeting and Powell has noted that they will let inflation run hot while the Fed focuses on maximizing employment.  Given that statement, inflation and bond yields shouldn’t be a factor at this meeting.

Other economic data

Retail sales were much higher than expected in March (increased demand).  Recent PMI data has shown that the recovery in manufacturing, and now services, are strong. However, there are supply concerns due to the coronavirus (decreased supply).  The net result should be higher prices, and thus higher inflation down the road, however the Fed is waiting for that HARD DATA before making a call.

Fiscal stimulus and taxes

Before the March meeting, Congress passed Joe Biden’s $1.9 trillion stimulus package.  Since then, Joe Biden announced his $2 trillion infrastructure package.  On Thursday, it was released that he is seeking a near doubling of capital gains tax for the wealthy from 20% to near 40%.  As these proposals are still in their infancy, the FOMC may want to see how these plans unfold over the coming months before they make a decision to reduce accommodation.

Coronavirus and vaccines

In the US, the coronavirus is increasing in some states, while decreasing in others.  The vaccine distribution is still strong, despite the pause in the Johnson and Johnson vaccine.  However, the Fed noted in March that there are still risks that cases consistently rise again due to mutations.  That is unlikely to have changed since the last meeting.

What to expect?

Expectations are for the FOMC to continue to sing their same tune. Without staff projections at this meeting (no dot plots), the most likely outcome will be Wait and see.  While the committee may note the pickup in the recovery, they will most likely continue to emphasis the need for a complete labor recovery and to see inflation sustainably above 2%.  Fed Chairman has said they will advise the markets well in advance of tapering the $120 billion in asset purchases each month.  This may not the meeting for this announcement.


Heading into the March FOMC meeting, the US Dollar Index had paused its rise as traders waited the results of the meeting.  On the day of the meeting, the DXY moved lower, only to resume its strong uptrend into the end of the month and quarter.  The DXY peaked on March 31st and has pulled back to the 61.8% Fibonacci retracement level from the February 25th lows to the March 31st highs, near 91.13.  As with the March meeting, price seems to have paused ahead of the meeting.  Any hints of tapering may send the DXY higher, while a discussion of “lower for longer” could cause the greenback to resume its move lower.

Source: Tradingview, City Index

Learn more about forex trading opportunities.


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.