USD: Robust data forces the Fed to sound less dovish At the March FOMC meeting, the Fed stuck with the view that the most likely path forward involved three 25bp interest rate cuts in 2024 with a further three in 2025. While they won’t be updating these forecasts again until June, the fact that inflation continues to run too hot for comfort and that the economy is still growing strongly suggests a more cautious take on prospects for policy easing at next Wednesday’s FOMC press conference. Core CPI has come in at 0.4% month-on-month for three consecutive months, more than double the rate we need to see to bring inflation down to 2% year-on-year over time. Meanwhile, the consumer continues to spend aggressively and the economy added 829,000 jobs in the first three months of the year. This led Fed Chair Jerome Powell to state on 16 April that “recent data have clearly not given us greater confidence” that inflation is coming under control and “instead indicate that it’s likely to take longer than expected to achieve that confidence.” He additionally warned that “if higher inflation does persist we can maintain the current level of restriction for as long as needed.”