A reduction in interest rates in March is practically excluded

An interest rate cut by the Fed in March is virtually ruled out. Powell indicated during a weekend interview that March was an unlikely date, which was also confirmed by statements from other Fed members.

In the case of the Monetary Policy Council, new inflation projections will be crucial, even though inflation for February and March will approach the inflation target, although probably only for a moment. To all this Rebuildables from Australia does not rule out a possible return to interest rate increases.

Economies are doing quite well

The market is hawkish again, although this mainly affects the currency market. In the case of the stock market, we do not see any major concerns about maintaining high interest rates for longer. This may be related to the fact that individual economies are doing quite well. Yesterday ISM for services from the USA shot up significantly, well above expected, also indicating greater inflationary pressure.

Today, orders from factories in Germany give hope that the economic crisis will pass and further recovery will occur in the coming months, although the rebound in the last month of 2023 resulted from very large orders for planes and trains. In addition, a few days before the start of the New Year celebrations in China, something happened verbal intervention from regulators, which led to a clear rebound on the stock market after subsequent declining sessions.

Powell rules out rate cuts in March

As you can see, we may experience economic recovery, which also limits the prospects for interest rate cuts. In the United States, the probability of cutting interest rates in March dropped to almost 10%. This is the result of Powell's hawkish statement, which practically ruled out the possibility of cutting interest rates in March and publishing further good data. Yesterday, the ISM index for services rose to 53,4 points from 50,5, however the price sub-index increased to as much as 64 points with the previous level of 57,4 points, which indicates increasing inflationary pressure.

March no longer seems to be a possible date for a Fed cut. Moreover, there are concerns that the Monetary Policy Council will not only not reduce interest rates in March, but may also not reduce interest rates at all this year. This will depend largely on administered prices and we will learn about their change later this year.

At 10:00 a.m. we pay PLN 4,0381 for a dollar, PLN 4,3394 for an ero, PLN 5,0691 for a pound, PLN 4,6344 for a franc.

Source: Michał Stajniak CFA, XTB