FXS Fed Sentiment Index recovers into hawkish territory following March meeting

• FXStreet Fed Sentiment Index rises into hawkish territory above 100.
• Fed left the policy rate unchanged following the March policy meeting.
• Markets see a less-than-20% probability of a Fed rate cut in May.

The Federal Reserve (Fed) announced that it left the interest rate unchanged at 4.25%-4.5% after the march 18-19 policy meeting. The revised Summary of Economic Projections showed that policymakers were still projecting a total of 50 basis points (bps) reduction in the interest rate in 2025.

While speaking in the post-meeting press conference, Fed Chairman Jerome Powell reiterated that the central bank will not be in a hurry to move on rate cuts, adding that they can maintain policy restraint for longer if the economy remains strong.

Commenting on the policy outlook, Chicago Fed President Austan Goolsbee told CNBC that the Fed needs to be a steady hand and take the long view on the economy. Similarly, NY Fed President John Williams noted that there is a lot of uncertainty in the economy, adding that they are not in a hurry to make the next monetary policy decision.

According to the CME FedWatch Tool, markets are currently pricing in about a 15% probability of a 25 bps rate cut in May.

Meanwhile, FXStreet (FXS) Fed Sentiment Index rose above 110 after dipping below 100 just before the Fed's blackout period started, highlighting a hawkish tilt in the Fed's overall language. This coincided with a three-day recovery in the US Dollar (USD) Index.