What to expect from the FOMC meeting: 250BPS down or 25BPS up?

Another FOMC meeting is around the corner and people have already started putting forth their expectations on the table. The situation this time is quite different, for the U.S. economy is in the midst of a banking crisis. Fear is instilled in the minds of depositors and investors, with regulators reportedly exploring options if things go further down south.

Now, in a recent tweet, American billionaire, Bill Ackman opined that the Federal Reserve should hit “pause” on Wednesday, March 23. He asserted that inflation continues to be a problem and the Fed needs to “show resolve.” Further explaining, he tweeted that Chair Jerome Powell could do so “by pausing and making very clear that this is a temporary pause so that the impact of recent events can be assessed.” Ackman added,

“This is not an environment into which the Federal Reserve should be raising rates and adding additional pressure on the system as financial stability is the Fed’s first responsibility.”

Others remain divided

However, not everyone is on the same page. According to Citigroup economist Andrew Hollenhorst, applying brakes at this stage would send the wrong message to the market. He explained,

“Fed officials are unlikely to pivot at next week’s meeting by pausing rate hikes, in our view. Doing so would invite markets and the public to assume that the Fed’s inflation-fighting resolve is only in place up to the point when there is any bumpiness in financial markets or the real economy.”