The United States (US) Federal Reserve (Fed) will announce its monetary policy decision and release its revised Summary of Economic Projections (SEP), known as the dot plot, after its March policy meeting on Wednesday. Market participants widely anticipate the US central bank to leave policy settings unchanged for the second straight meeting, after cutting interest rates by 25 basis points (bps) to a range of 4.25%-4.5% in December.

The CME FedWatch Tool shows that investors see little chance of a rate cut in March while pricing in about a 30% chance of a 25 bps cut in May. Therefore, the revised forecasts and comments from Fed Chair Jerome Powell could drive the US Dollar (USD) valuation rather than the interest rate decision itself. In December, the dot chart showed that policymakers projected a 50 bps cut in the policy rate by 2025, while forecasting annual gross domestic product (GDP) growth of 2.1% and seeing annual personal consumption expenditures (PCE) inflation of 2.5% by year-end.

"The FOMC is widely expected to keep its policy stance unchanged for the second straight meeting," said TD Securities analysts who preview the Fed event. "Given the still-steady signals provided by the labor market amid still-sluggish inflation, we expect Chair Powell to double down on his message of patience regarding policy decisions. We also do not anticipate any significant changes to the Fed's SEP or QT plans for now," they added.

Source: FXStreet