FXStreet (Delhi) – Research Team at BBH, suggests that today's FOMC meeting was never really considered a live meeting, in the sense that after the December hike, there was practically no chance of a follow-up move today, even if the data had been better and the markets were not as volatile.
"Whatever gradual may mean to the FOMC, it does not mean a hike at two consecutive meetings.
Many observers see a dovish tone to be expressed by the recognition that the economy appears to have slowed to less than 1% annualized pace in Q4 (report Friday), and the decline in market-based measures of inflation expectations. The Fed is also expected to note the turbulence in the capital markets in recent weeks. Nevertheless, we do not expect the FOMC, which is data-dependent, to say anything that rules out a March hike.
The key piece of economic data that has been reported since the December FOMC meeting was larger than expected increase in the n onfarm payrolls. The Fed's leadership embraces the Phillips Curve. Provided the slack in the labor market continues to be absorbed, they will be "reasonably confident."
The March Fed Funds futures contract is implying an average rate of 39.5 bp compared with a recent average of about 36 bp. That said, we note that last Friday was the first time that the average effective Fed Funds rate moved above the middle of its 25-50 bp range. Remember in calculating the average rate, the Friday rate counts for three days."