FOMC Minutes March Preview: USD and yields to benefit from any suggestion of a policy change

The Federal Reserve's meeting minutes from its March meeting may shed some light on how many members see interest rate hikes coming sooner rather than later. The Fed is more optimistic than beforehand but urged caution. In the view of FXStreet’s Analyst Joseph Trevisani, the US dollar and yields will benefit from any suggestion of a policy change.

Markets looking for any hint that the Fed is considering curtailing bond purchases

“The Fed has made it clear that it no longer has a reactive inflation policy and that price changes are not at the center of its considerations.  Economic growth and employment are the bank’s focus and the reason for keeping short-term rates at their historical lows.” 

“Even though the fed funds rate is projected by the Fed’s own estimates to be unchanged until the end of 2023, that does not mean the $120 billion each month bond purchases has the same expected longevity.” 

“Markets anticipate that as US economic growth accelerates the Fed will reduce and eventually end its bond program. That expectation is the chief reason behind the steepening of the Treasury yield curve this year.” 

“The FOMC minutes will be scoured for clues to the logic, timing and size of any change to the Treasury intervention. Any notice that the conditions for a reduction in bond purchases were discussed will be taken as indication that the time is approaching with commensurate market impact.”