The fed funds rate is unlikely to be cut in March when the Federal Reserve’s monetary policy decision makers hold their next meeting. We can say that with some clarity because Chair Jerome Powell voiced it in as many words, saying that it was “not the most likely case or the base case.” The official Federal Open Market Committee statement erased language it had used previously that it held a bias toward more hikes, but that had been universally expected. Such clear guidance for March had not been, and it had an impact.
The stock market appeared to have put more weight on imminent cuts than anyone else. A busy day had already included: results from Alphabet Inc. and Microsoft Corp., news of serious difficulties for New York Community Bank that pushed its stock down 45%, an announcement from the Treasury that it was going to be auctioning over the next three months somewhat more longer-term bonds than had been expected, and macro news suggesting the labor market might be cooling down a bit. Despite all of this, the circumstantial evidence is that it was Powell’s words on a March cut that substantially did all the damage: