Wednesday's FOMC meeting will take center stage this week amidst a moderate dose of US data releases that will be heavily scrutinized for signs of further weakness. We expect the Fed to hold rates steady for the second consecutive meeting and, given heightened uncertainty, provide limited guidance about the policy path ahead. The updated Summary of Economic Projections is likely to show a median expectation of two rate cuts this year, unchanged from December. Sentiment toward US economic prospects has already taken an abrupt turn for the worse over the past month. The S&P 500 selloff the fastest decline since 2020 has entered correction territory. With the Trump put vanishing, it could get still worse if there’s also no “Fed put” forthcoming. We see mounting downside risks to the economy that could require the Fed to reduce rates by total 75 bps in REMCY25. In US macro data, we see headline retail sales data at 0.6% (more of a rebound from Jan low nos) while the ex auto and control nos are likely to be weak at 0.2% each. We expect soft industrial production nos along with existing home sales. In UST supply, we have 13 BN USD supply of 20yr USTs & 18 BN USD supply of 10yr TIPS. In Germany we have Bundestag voting on 18th March on the new Chancellor Merz's fiscal bazooka of 500 BN USD for infra spending & a far larger defense spending. The Bundesrat vote is planned for Friday (21st March). Those plans need to be passed quickly, ahead of the new parliament sitting for the first time (25 March), during which time the electoral math remains favourable to make constitutional changes (which require a two-thirds majority in parliament). In central bank meeting, we expect SNB to cut rates by 25 bps in it's 20th March meeting. We expect BOE to remain on status quo in it's 20th March meeting though we continue to expect 25bp rate cuts at the Monetary Policy Report meetings until early 2026 (i.e. 25bp in May, August, November 2025 and February 2026) for a terminal rate of 3.50%. In the 19th March meeting of BOJ, we expect status quo too. But we still expect two more hikes of 25 bps each by BOJ in REMCY25.
