US Interest Rate Prep [29th April]

On Wednesday, 29th April, at 14:00 ET, the FOMC concludes its 2-day meeting and announces the US Interest Rate decision, and releases the FOMC Rate Statement.
Here are some views on what to expect.

Overview
For the US Interest Rate Decision, the median forecast and market pricing expect the rate to remain unchanged at 3.75%.

What to Expect
US Stocks
If the Fed delivers a more dovish statement, for example by sounding more confident on inflation or more concerned about growth risks, equities could react positively, particularly rate-sensitive sectors like technology and consumer discretionary.
A more hawkish tone, emphasizing sticky inflation or less urgency to ease, could weigh on stocks by tightening financial conditions.
US Dollar
A hawkish outcome would likely support the dollar, as markets would price in rates staying restrictive for longer.
A softer statement would tend to pressure the dollar, especially if investors interpret it as opening the door to earlier easing.
US Government Bond Yields
If the statement leans hawkish, yields may rise, particularly at the front end, as markets push back expectations for rate cuts.
If the Fed sounds more dovish or highlights downside risks to growth, yields may fall as investors price in a more accommodative path.
Federal Reserve Policy
The key focus will be whether the Fed keeps emphasizing patience and inflation risks, or begins to sound more open to easing later this year. A statement that still stresses uncertainty and caution would reinforce a patient Fed, while softer language on inflation or growth would strengthen the case for a more accommodative policy path over time.

Commentary
Deutsche Bank
The Fed is expected to keep rates unchanged at the April FOMC meeting, with policy still seen as well positioned to deal with risks to the outlook. The main focus will be on whether the statement or Powell’s press conference starts to sound more balanced on the risks, though the base case is still that any more meaningful shift in guidance waits until June. The risk for markets is that the communication leans a bit more hawkish before then.

Only limited changes are expected in the statement, with recent data still fitting the Fed’s view of solid growth, low job gains, little change in unemployment, and somewhat elevated inflation. Powell is likely to focus on the Middle East conflict and stress that uncertainty remains high, while also warning that the longer oil prices stay elevated, the greater the risk that inflation pressures become more persistent.

Wells Fargo
The Fed’s dual mandate remains in tension, with PCE inflation still expected to stay around 3% and the Middle East energy shock likely to push headline inflation higher in the near term, while the labour market continues to lose momentum. Against that backdrop, the Fed is expected to stay patient and leave rates unchanged at next week’s meeting.

The statement is likely to stress optionality, with the Fed expected to acknowledge higher energy costs and soften its forward guidance by shifting to more open-ended language around future policy moves. Powell is also likely to emphasise that policy is well positioned to wait for more data, while highlighting the added uncertainty from the Iran conflict and repeating that the Committee stands ready to adjust policy as needed. Two 25bp cuts are still expected this year, in September and December.

Previous Release
At the previous meeting in March, the Federal Reserve held the target range for the federal funds rate at 3.50%–3.75%. In the statement, the Committee said economic activity had continued to expand at a solid pace, the unemployment rate had stabilized at a low level, and labor-market conditions remained solid, while inflation remained somewhat elevated.

The Fed also noted that uncertainty around the economic outlook remained elevated and said it would carefully assess incoming data, the evolving outlook, and the balance of risks before making any further adjustments. Overall, the message was steady policy, cautious language, and continued data dependence.