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No cuts in the horizon

The March FOMC meeting starts today. Tomorrow by 2 pm official rates will probably be the same, but J Powell will communicate the Fed’s intentions in terms of monetary policy for the rest of the year. Since it is the one year aniversary of the fallout of Sillicon Valley Bank, he may also comment on the status of the financial system and if he thinks the Bank Term Funding Program should continue. In the meantime, stocks, other than the #magnificent7, are taking a breather, conscious that rate cuts are not imminent, and bonds, particularly the 2 year Treasury yield, the most sensible to Fed Funds, is going up, reflecting the new reality on rates. The 6 rate cuts expectation the market had at the beginning of the year has dissapeared, and even the four rate cuts plan the Fed projected at the end of 2023 is starting to sound improbable. The June odds for a rate cut is now below 50%, which aligns the market with the Fed.

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