All Eyes on Powell’s Press Conference, FOMC Decision Tomorrow

Rates mixed ahead of FOMC day, Powell presser. The swap/yield curve flattened today ahead of tomorrow’s FOMC decision, the first of eight policy meetings this year. Yields rose 4-8bps immediately after data showed that consumer confidence rose to its highest level since December 2021, though the long-end of the curve closed 3-6bps lower on the session. Meanwhile, tech stocks were dealt an after-hours blow as Alphabet results underwhelmed, with weak advertising revenue the main catalyst.

ECB President Lagarde labels wage data “critically important” on the path toward rate cuts. Following the ECB’s decision to hold rates steady at 4% last week, Christine Lagarde emphasized that wages will be crucial to determining the timeline for rate cuts. She also noted that progress needs to be made on inflation, which was 2.9% in December, a 0.5% jump from November. Though the exact timeline remains unclear, hikes are seemingly out of the picture; Lagarde added, “I think we all agree that the next move” — irrespective of when it comes — will be a cut.”

IMF raises global growth forecast. The IMF expects above-estimated expansion in the US and elevated Chinese fiscal stimulus to spur global economic growth. The IMF raised its world economic growth projections to 3.1% in 2024, up from last October’s 2.9% estimate. The release noted, “the likelihood of a hard landing has receded, and risks to global growth are broadly balanced,” due to disinflation and steady growth. However, in a nod to central banks worldwide that have pushed against aggressive market pricing of near-term easing, the report noted that, “Looser fiscal policy than necessary…could imply temporarily higher growth, but at the risk of a more costly adjustment later on.”