On the March FOMC

A “dovish hike” where 25 bp on the funds rate is offset by no change in the “dot” for the year-end rate at 5-1/8%. Powell sanctimoniously paid lip service to the risks of a deepening banking crisis, but under questioning reveals he sees it as the equivalent of a rate hike, helpfully tightening conditions in his holy war against an inflation that has already peaked. On the face of it the steady year-end “dot” implies one-and-done, but it's silent as to the peak rate in the meantime, and clearly implies the rate should be expected to be higher than it is today nine months from now. Markets weren’t surprised by the hike. The futures-implied probability of it was 80%, and now there’s a 55% probability of another 25 bp in May. The implied path moved lower overall after the meeting statement, and the year-end expectation is for 4-1/8%, a full percentage point below the “dot.”