The FED hiked from 0.25% to 0.50%, although the main takeaway from the Fed decision was 7 hikes in the dot plot for this year, versus about 5, which most economists were flagging. That led to an initial push higher in front-end rates and a 60% implied probability of a 50 bps hike in May at the next meeting.

But the USD started turning lower as Powell started to speak. I can’t tie that move to anything he said. Perhaps there were some people looking for a clear nod to 50 bps or a faster pace of hikes, but I find that thinking to be a stretch. It is more likely that it was a reversion to the earlier theme, revealing that dip buyers have been waiting for the FED risk to pass. We’ve seen that before, but it will take the week to sort out whether it’s real, or just a temporary blip.

For March 2022, the median rate at the end of 2022 was 1.9%, vs 0.9% in December. That means seven hikes in 2022, which is congruent with the market, but above expectations from the Fed. In 2023 the expectations are for 2.8%, vs 1.6% median (and 11 of 18 at 1.9%) in December. They also expect 2.8% in 2024.

Dot plotFOMC dot plot from March 2022

The Dot Plot in December was as follows:

Dot plotThe Dot Plot from December 2021

The table of the central tendencies from March 2022 is as follows:

Central tendencies
Central tendencies from March 2022 meeting

Summary of central tendencies from March, compared to December, now showing for 2022:

  • GDP lowered to 2.5% to 3.0%, from 3.6% to 4.5% in 2022
  • Unemployment rate nearly unchanged at 3.4% to 3.6%, from 3.4% to 3.7% in 2022
  • PCE  inflation  much higher at 4.1% to 4.7%, from 2.2% to 3.0% in 2022
  • Core PCE inflation much higher at 3.9% to 4.4%, from 2.5% to 3.0% in 2022

Expected figures for 2023:

  • GDP nearly unchanged at 2.1% to 2.5%
  • Unemployment rate almost unchanged at 3.3% to 3.6%
  • PCE inflation higher at 2.3% to 3%, from 2.1% to 2.5% in December
  • Core PCE inflation higher at 2.4% to 3%, from 2.1% to 2.4% in December