The ongoing Mideast conflagration remains the main event for markets. As of this writing, rates have notably rebounded from the multi-month lows of end-February. See herein for context and color. The key event of the upcoming week should be the FOMC meeting and policy decision. While no change in rates is the universal expectation, the Fed’s updated quarterly Summary of Economic Projections (SEP) will also be reviewed by market participants. The SEP provides Fed members’ projections on growth, inflation, employment, and rates (aka “dot plot”). Given the outbreak of the Mideast conflict, the FOMC statement and Chair Powell’s post-meeting press conference will surely address the topic, although the feedback may be of the “too-soon-to-tell-with-elevated-uncertainty” variety on its lasting impacts. The market’s pricing of the Fed has shifted notably; please see herein for more information.

We are now experiencing a “higher for longer” phase in the interest-rate cycle, accompanied by an inversion in the short-to medium terms followed by a steepening (see following chart). The Fed is still in a restrictive posture, but market expectations indicate a near-term easing, however, uncertainty surrounding the potential of future heightened growth leading to elevated inflation is causing steepening at the longer-end of the curve…

Kristina Hooper discusses her outlook for the economy and markets for the remainder of 2023 and beyond. From recent challenges in the banking industry to inflation to earnings, 2023 has already faced a variety of uncertainties…