The March FOMC meeting is behind us. The bottom line is the Fed still sees 3 rate cuts this year. And the probability of a June cut jumped again to 75%, putting it back on the table. The dot chart below can be interpreted in many ways, but the market has decided to take the bullish view. In addition to rate cuts, Powell mentioned that at some point they will reduce the pace of Quantitative tightening (less QT= QE??). In other words, the pace of reduction of the balance sheet will slow down from $95Bn a month, until it reaches a point where runoffs may be reinvested again, since the Fed cannot reduce its balance sheet beyond a certain point without affecting the financial system. All in all, the market got what it wanted and indices and spreads reacted positively. Regarding the BTFP, the program is no longer extending new loans to banks since March 11, but they have access to other liquidity sources within the Fed.

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