What To Expect When You’re Expecting The Fed – March 2021 Edition

Every six weeks or so, all investors’ eyes turn to the Federal Reserve. It’s not as though the Fed isn’t in at least the market’s peripheral vision all the time, but there is laser-like focus when the Federal Open Market Committee (FOMC) meets. Today is one of those days. We will receive a statement from the FOMC at 2:00 pm Eastern, and Chairman Powell will hold a press conference a half-hour later. Here are some things that I will be watching for this afternoon:

  • Connect the Dots – Since 2011, the Fed has released the “Dot Plot”. Each of the FOMC members assigns a dot for their expectation of the Federal Funds rate at the end of the next three years and over the longer run. The intent is to provide clarity into what the individual members (anonymously) expect over the coming years and to prepare markets for potential shifts in rates. This is an interesting exercise because the people making the outlooks are the same ones who make the ultimate decisions. As of the end of 2020, there was unanimity that rates would not rise in 2021, and a distinct majority of opinions showed no rise through 2023. While no one expects the Fed to signal any change in rates at the current meeting, and few expect a change in the near-term, markets are quite curious to see if the recent rounds of fiscal stimulus and widespread adoption of Covid vaccines will push forward the anticipated timing of rate increases.
  • SLR– I’ve been an amateur photographer for years, and I was surprised to see increasing concerns about single-lens reflex cameras in the financial news. Upon further inquiry, of course, I quickly realized that the financial press was using that acronym for Supplemental Leverage Ratio. SLR was an obscure topic for the vast majority of investors, useful only to bankers and their regulators and analysts. The ratio divides Tier 1 capital by the total leveraged exposure of the bank.  According to the Federal Reserve:
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Disclosure: The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the ...

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