CZK: Koruna Edges Higher, Global Sentiment In Driving Seat
EUR/CZK trades -0.024 at 25.069 and a dip through the 25.0 mark would open up 24.845, which limited losses on Mar 26. Conversely, bulls look for a rebound towards Apr 7/Jan 17 highs of 25.295/25.317.
- Former CNB Monetary Department chief Petr Kral confirmed to Seznam Zpravy that he quit the central bank in January amid disputes with Governor Ales Michl. Speaking in a podcast, Kral claimed credit for defeating inflation and said that he gradually lost the feeling that there was room for constructive discussion on monetary policy within the central bank. According to bne IntelliNews, having worked for the CNB for 25 years, Kral was "one of the architects of the bank's traditional hawkish monetary policy."
- CZGB yields are marginally mixed. The PX Index has added 1.6% this morning.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
