The February Nonfarm Payrolls figures surprised to the upside, revealing that the US labor market grew by 236K, compared with the 160K increase expected by analysts. The unemployment rate fell to 7.7%, it's lowest post-crisis level, but still far from the 6.5% objective established by the FOMC, which would allow it to exit the QE program. Therefore at the March meeting status quo should be maintained.


"The Fed’s message in the upcoming meeting is likely to be that one swallow does not make a summer," suggests Alistair Cotton and other market experts contributing to the forecast report agree that the recent improvement on the US labor market does not equal a stable recovery. As Luciano Jannelli points out, for the Fed to consider changing its monetary policy, "we would need monthly job creation in excess of 200000 units, while the average of the last 6 months is at around 170000."

We also have to bear in mind that "with the impact from the sequestration yet to be felt in the months ahead, the Fed is currently not in a position to start tightening," as Ilian Yotov implies. Thus the general expectation is that the current monetary policy will remain unchanged at least until the end of the year.

Should Ben Bernanke nevertheless hint at an earlier exit from the QE program, which possibility is considered by Alberto Muñoz, "we could see a strong rally in the greenback."

The FOMC will announce its monetary policy decision on March 20 at 18:00 GMT. Below you will find the full forecasts of the contributing economists:

Luciano Jannelli, Ph.D. - Chief Economist at MIG Bank:

LucianoJanelli "The February rise in NFP does not yet reflect the 'substantial' improvement in the employment outlook, required by the Federal Reserve in order to change its monetary policy. For the Federal Reserve to stop acquiring assets to the tune of 85 billion USD a month, we would need monthly job creation in excess of 200000 units, while the average of the last 6 months is at around 170000. Also, the Federal Reserve would like to first have some more clarity about the impact of the sequester on the US business cycle. It would not want to withdraw its asset purchases at the same time that the cycle weakens because of reduced government spending. Therefore we would not expect any QE exit before the end of this year. From a forex perspective this is, however, not that important. The very fact that there is talk about QE exit, while other major central banks are poised to add stimulus, is bullish for the US dollar. So, we do not expect easing to end soon, but as other countries are actually increasing their expansionary stance, the mere speculation about when the Fed will exit is enough to support the USD."

Alistair Cotton - Senior Analyst at Currencies Direct:

AlistairCotton"The Fed’s message in the upcoming meeting is likely to be that one swallow does not make a summer.  With policy now explicitly tied to driving down the unemployment rate, even a string of 250,000-plus NFP numbers over the coming months will not bring the rate of joblessness down enough for the Fed to consider tightening monetary policy this year. Low rates and ultra-accommodative policy are here to stay for the foreseeable future."

Ilian Yotov - FX Strategist and Founder at AllThingsForex:

Ilian Yotov"Despite the improvement in the U.S. labor market and other sectors of the economy, the Fed has made it very clear that policy makers are committed to open-ended QE until the unemployment rate falls below 6.5% or inflation exceeds 2.5%. With the impact from the sequestration yet to be felt in the months ahead, the Fed is currently not in a position to start tightening and will maintain the current monetary policy course at its March meeting, and probably into 2014. In other words, QE and 'exceptionally low levels for the federal funds rate' are here to stay and the greenback could come under pressure if the FOMC statement reminds the markets that the Fed is in no hurry to call it quits anytime soon."

Alexandra Estiot - Senior Economist at BNP Paribas:

Alexandra Estiot The strong rebound in February job creations is unlikely to change the Fed’s policy. In a recent speech, Vice-Chairwoman Janet L.Yellen provided a road map to the current Fed’s policy. She stressed five different indicators. If the growth in non-farm payrolls is among them, the unemployment rate and the GDP growth rate are another two. Economic indicators for early 2013 point to a reacceleration from the disappointing Q4 2012, but the unemployment rate remains well above its long-term equilibrium as estimated by FOMC members (5.2%-6.0%). On top of that, the hiring rate and the quitting rate, the other two indicators that Mrs Yellen favours, are still very far from their pre-crisis levels. Another element to take into account is the seasonality that pushed up economic indicators in early months of the year in both 2011 and 2012 to then push them down. To be sure 2013 is different we will probably have to wait until spring. Taking all these elements into account, economic conditions are not very much different from late-January, and the Fed is thus unlikely to signal a shift of its policy. The updated forecast as well as the press brief from Chairman Bernanke will however be very interesting as they will clarify what the Fed expects to come next. From that set of data, it will be possible to get a clearer idea of the likely timing of the tapering off with QE3.

Steve Ruffley - Chief Market Strategist at

Steve Ruffley"As I have said time and time again in my previous reports, every time the US needs a boost there is data on hand to do this. I was caught out on this in my NFP prediction and in my trading of the event, I feel I am not the only one. This again is only one piece of data, but with the Initial jobless coming in lower than expected the employment in the US, at least, looks to be to be one of the main catalysts for driving stocks higher.

What does the mean for the FOMC minutes this month? Well domestic jobs alone do not solve the issues still facing the long term economic growth forecast for the US. The worries are that even when people are employed and stable in their prospects they are still not spending like they did 4 or 5 years ago. In the wider picture for morality and staying away from the boom and bust scenarios this is good, and holds out the hope that people finally may be living within their means.

With inflation squeezing the Dollar and spending power in everyone’s pocket the US needs to reply on external spending. However with the onslaught of the currency wars and also the recent disappointing figures from China, there is not room for the FED to start to ease up on QE just yet. The markets are very greedy right now, the let the markets sell off on bad news and buy up on the notion of perpetual QE and stimulus. They also sell off on good data, like NFP, and then rally back sighting 'value'. The speculators are driving the markets right now, so in my opinion the FOMC will say very little until May, as realistically unless they say categorically there is will be imminent end to QE the markets will pay no attention whatsoever."

Adam Narczewski - Financial Analyst at X-Trade Brokers, XTB:

Adam Narczewski "The upcoming FOMC monetary policy meeting will be interesting. The recent better than expected reading of the NFP gave another argument to James Bullard, the main proposer of decreasing QE by the end of the year. At the same time, I believe Bernanke will pressure his colleagues not to change anything at this moment. It would be awkward for Ben to deliver a hawkish statement in light of what he was saying in front of Congress two weeks ago (QE is needed, no changes are expected). That is why I expect the Fed will try to ignore the better macro data. The question is any other member will vote against the Fed’s decision besides Esther George. The perfect candidate seems Bullard but he used to say he prefers to convince FOMC members to his views, rather than voting against the current policy.  Despite this 'game' going on, I do not think the Fed (or Bernanke during the press conference following the FOMC decision) will make any hawkish statements. They know how sensitive the market is nowadays and how closely it will be watching for any signs of monetary policy change announcement. If the Fed is unable to provide a clear, vague statement, but instead hawkish ideas will be 'smuggled' in Ben’s speech, the EUR/USD decline can reach levels way below $1.30."

Yohay Elam - Analyst at Forex Crunch:

Yohay Elam"The FOMC is unlikely to change nor hint a change in policy in the upcoming meeting. A 7.7% is the best post crisis figure, but still far from the 6.5% goal that the Fed stated for changing the interest rate. The meeting minutes revealed some hawkish views, but the hawks are still a minority. Doves led by Bernanke still command a majority.

The Fed could note the improvement in jobs and perhaps say that the economy returned to growth after a pause in Q4, but the overall picture isn't likely to change. This outcome will probably lead to some minor dollar selling - an opportunity to take dollar profits after the recent rally. Any unexpected hint about stopping or reducing the open-ended bond buys will send the dollar sharply higher across the board." 

Bill Hubard - Chief Economist at  

Bill Hubard"Along with the signs of some scaling back of QEIII expectations, the expected timing of the first Fed rate hikes was shifted forward 'modestly,' from late 2015 more towards mid-2015.  The January 2015 fed funds futures contract lost 5.5 bps on the week to 0.32%, July 2015 10.5 bps to 0.51%, and December 2015 14.5 bps to 0.725%. Pre-crisis research had estimated the term premium on fed funds futures at several basis points per month in more normal times. Fed guidance has likely sharply reduced that, but even a small term premium over a couple years would suggest a 0.51% July 2015 fed funds futures is still pricing the first rate hike not coming before the middle of 2015 at the earliest.   

For the 20 March the Fed will maintain the status quo. But, the clock is ticking and by Q4 the pace of asset purchases will be diminished, and possibly terminated at year-end."

Talal Abdullah - Financial Analyst at

Talal Abdullah "The FOMC is about the first meeting after activating the so-called 'Sequester' and spending cuts will surly cause job losses and would 'visit hardship.'

Federal Open Market Committee will surely keep the benchmark interest rates unchanged at exceptionally low levels, and I do believe they would signal that stimulus plans will be kept at least until the end of the third quarter 2013, as unemployment may 'tick up again' where 'people may lose their jobs' after 'Automatic Spending Cuts' show effect.

The Federal Reserve will surely keep monetary easing to help the economy. Fed wants to see unemployment rate around 7% before bond purchases end, and around 6% before the FED starts raising interest rates again.

I do believe that the Fed will keep the rates near zero at least until mid-2015, to support economic growth, as long as the inflation levels remain subdued, noting that the latest QE announced by the FED is to buy $45 billion a month of MBS (Mortgage Backed Securities) pumping enough money into the economy in order to lower mortgage rates, could lead to more spending as well as more hiring by businesses."

Alberto Muñoz, Ph.D. - Forex Analyst at

Alberto Muñoz "The recent surprise in the Unemployment Rate and Non Farm Payrolls definitely increases the chances of the Fed phasing out its quantitative easing program. In fact, the last FOMC minutes pointed out that it would prepare to exit the program when the national unemployment rate reaches 6.5 percent, which it's not very far from the current level of 7.7 percent.

Also inflationary risks are increasing as the Fed continues to purchase more and more mortgage-backed securities to keep interest rates down, so probably Bernanke could be hinting an early exit next Wednesday, though not strong enough yet as the Fed will probably wait until next employment report to see if the jobs creation remains sustained.

If this scenario is confirmed, then we could see a strong rally in the greenback after the FOMC meeting, driving the EURUSD below the strong support at 1.2875."

Valeria Bednarik - Chief Analyst with

"The US economy has been showing strong signs of recovery lately, and market has been responding positively to the change: the greenback is being bought on self strength, mostly against it European rivals. If the FED decides to acknowledge latest economic improvement, particularly from the employment sector, market may understand it as an increasing possibility of seeing the end of QE. Although I consider they will keep current programs in place, for most of this year, and chances of retrieving facilities are too low, market will probably run to price in any word on this matter, with dollar accelerating higher on any chance of an economic policy change that means less easy money. Stocks may suffer big along with dollar gains."