Rabobank's Senior US Strategist, Philip Marey, anticipates that the Federal Open Market Committee (FOMC) will keep monetary policy unchanged at its upcoming April 28-29 meeting, with the expectation that Governor Miran may dissent once again [1]. The bank continues to project two interest rate cuts in 2024, specifically in September and December, but cautions that ongoing war-related developments, particularly the conflict with Iran, could prompt the removal of a rate cut from their forecasts rather than the addition of new ones [1].
Chair Powell is expected to address the economic implications of the war with Iran during the post-meeting press conference, discussing how recent economic data reflect these impacts and what they mean for future monetary policy [1]. Rabobank notes that the incoming economic data, which will be heavily influenced by the war, will play a crucial role in determining the Fed's next steps [1].
Looking ahead, Rabobank suggests that once Warsh becomes the new Fed Chair, he may attempt to persuade the Committee to implement more than the single rate cut indicated in their latest projections. However, the success of this effort will depend on the evolving economic data [1]. There is also uncertainty regarding whether the April meeting will be Powell's last as Fed Chair, as his term ends on May 15. If Warsh's confirmation is delayed, Powell could continue as Chair pro tempore in June [1]. Powell may also face questions about his future role as a Fed Governor after his term as Chair concludes [1].
CONCLUSION
The Federal Reserve is expected to maintain its current policy stance at the upcoming FOMC meeting, with Rabobank signaling a cautious outlook on rate cuts due to escalating war risks. Market participants should closely monitor economic data and leadership developments at the Fed, as these factors could influence the timing and extent of future rate adjustments.