Fed's March Dot Plot and Rate Cut Probabilities

Watching the Fed's stance closely, my current read suggests a slightly more hawkish dot plot for March than some anticipate, particularly regarding the median projection for 2024 rate cuts. While the market has been pricing in a good chance of 3-4 cuts by year-end, I'd assign about a 60% probability that the Fed's updated median dot plot projects only two cuts for 2024. The reasoning here stems from persistent, albeit moderating, inflation data, coupled with a remarkably resilient labor market. Recent rhetoric has leaned into a 'higher for longer' narrative, and unless we see a significant deterioration in economic data between now and March, Powell and co. will likely want to maintain optionality and avoid prematurely signaling an aggressive easing cycle. This could lead to some short-term volatility, especially in rate-sensitive assets, but for now, the economic data isn't screaming for rapid cuts, and the Fed is acutely aware of the 'stop-start' policy missteps of the past. The current levels of $CRV, trading around $0.2512, are interesting to watch in this context as broader market sentiment shifts based on these macro cues.