What's priced in for the Federal Reserve ahead of Wednesday's FOMC decision

<p>Wednesday's FOMC decision is highly unlikely to feature a change in rates but it will set the tone for the next decision — on March 20 — that's highly uncertain.</p><p>For tomorrow, the odds of a cut are just 2% but at the March meeting, the market is pricing in a 42% chance of a cut. At the May 1 meeting, there are 30 bps of easing priced in and for June 12, two cuts are full priced in. At the end of the year, the market sees 130 bps of cuts.</p><p>For now, the focus will be on Wednesday and whether the FOMC indicates that it's fully prepared to lower rates. Expect some of the hawkish language to be erased with the Fed taking a more balanced approach. I'm sure there will be a strong focus on data dependence and that will take us right into Friday's non-farm payrolls report.</p><p>Will one or two softer reports be enough for the Fed to start re-calibrating policy? I think it will be but any clarification from Powell would be welcome. But when the dust settles, I expect it will be May or June before the Fed starts nibbling at rates.</p>

This article was written by Adam Button at www.forexlive.com.