March 2025 FOMC Preview: Not in a hurry to get worried
At a Glance
The desk anticipates a neutral stance from the Federal Reserve at the upcoming March FOMC meeting, reflecting a lack of urgency to adjust interest rates despite recent market volatility. Per the full note from MUFG EMEA, George Goncalves emphasizes that the Fed is not inclined to react hastily to tightening financial conditions. This perspective aligns with our view that the Fed will maintain its current policy framework, allowing for a more stable outlook in the FX markets. With no high-impact events on the calendar in the next 30 days, traders should focus on the implications of this neutral Fed stance on currency pairs, particularly the USD's performance against major currencies.
Key Takeaways
Full Analysis
What the desk is arguing
MUFG's George Goncalves expects the Fed to deliver a neutral message at the March FOMC meeting, emphasizing that policymakers are "not in a hurry" to cut rates. The recent market volatility and tightening financial conditions are not viewed as sufficient to shift the Fed's cautious stance.
Goncalves believes the current environment does not warrant immediate action, as the Fed remains focused on inflation risks and economic resilience. This view implicitly rejects the narrative that recent volatility could force the Fed into a dovish pivot.
Where it sits in our coverage
We maintain a Eurozone-focused coverage, and while this FOMC analysis does not directly address EUR/USD, the neutral Fed stance broadly aligns with our expectation that the Fed remains on hold through early 2026. Our consensus target for EUR/USD at December 2026 is 1.12, with a spread of 1.04-1.18.
From our per-firm coverage, Goldman Sachs targets 1.15, JPMorgan targets 1.10, and Barclays targets 1.08, all for year-end 2026. MUFG's neutral view is consistent with these targets, as a patient Fed supports a gradual dollar depreciation scenario.
How other firms see it
The neutral-Fed consensus is broadly held. Standard Chartered similarly expects no rate cuts in H1 2025, aligned with MUFG. Deutsche Bank also sees the Fed on hold, emphasizing inflation persistence.
Contrary views include Bank of America, which argues the Fed may need to cut earlier due to economic slowdown, and Citigroup, which sees a cut as early as June 2025 if financial conditions tighten further.
Market Implications
A neutral Fed supports USD stability in the near term, with gradual depreciation expected as data evolves. EUR/USD may trade within 1.06-1.10 range ahead of FOMC.
From the original
George Goncalves, Head of Macro Strategy in the Americas, recaps what has been driving market volatility as well as where he thinks broader markets may go in the short-run. Additionally, he goes over what to expect at the March FOMC meeting where the Fed likely conveys a neutral
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