Three and one from the Fed

Daily update

The Federal Reserve is universally expected to leave policy unchanged. Fed Chair Powell’s press conference excites attention for three reasons. 1. Powell may stay as Fed Chair beyond May, so is a less lame “lame duck” leader. 2. Markets want to know the Fed’s reaction to oil prices and the war. US retail gasoline prices are almost exactly a dollar (35.5%) above 2026 lows, having risen every day for four weeks. The Fed’s concern is second-round effects.
3. Markets want to understand the Fed’s views of the underlying economy, as investors seem to expect the US to exit the war and energy prices to normalize. There is also reason to downplay Powell’s remarks; although not necessarily prime-time viewing, Powell’s remarks are likely biased to stressing economic resilience, to reassure US households.
US February producer price data is due. This has been volatile recently (some firms seem to have passed on price increases earlier than in a normal pricing cycle). It is too soon for the data to reflect war damage, but things like trucking prices might reflect immigration policies.
Eurozone final February consumer price inflation is unlikely to raise even a flicker of interest, in spite of the imminent ECB policy decision—it will confirm the flash estimate.