I wouldn’t want to be Jerome Powell right now. Or any other time either for that matter, although Jay’s doubtlessly lived a (far) more fulfilling life than I have.

Powell’s tenure at the helm of one of the world’s most important institutions has been an almost comically fraught affair bedeviled by a once-in-a-generation public health crisis, a generational inflation shock and a US president with Erdogan-esque designs on monetary policy.

Alas, there’s no rest for the weary and Powell’s task in 2025, likely the last full year of his chairmanship, is to navigate tariffs, deportations and an ambitious (to employ a polite euphemism for the Trump administration’s civil service purge) bid to gut the federal government in the name of cost-cutting, an effort that’s very likely to dent consumer spending.

The March FOMC meeting plays out in the shadow of a deeply concerning spike in households’ longer run inflation expectations, a sharp drop in consumer sentiment and a meaningful decline in domestic equity prices as investors struggle to navigate daily, and sometimes hourly, shifts in US trade policy.

Market pricing for 2025 Fed easing faded a bit as US stocks rallied to close out an otherwise rough week. At ~65bps, traders have fully priced two cuts with better than even odds of a third. Economists see September as the most likely meeting for the first of the two cuts consensus expects.

In the new SEP, the Fed will want to strike a balance between acknowledging, on one hand, upside risks to already sticky core inflation and, on the other, downside risks to growth.

Whatever the real-world outcome, Trump’s policy platform is stagflationary on a textbook interpretation, which is to say if you simulated it in a lab experiment it’d be expected to bias prices higher and growth lower. The administration says that’s not how things’ll play out. Maybe they’re right, maybe they aren’t, but the Fed’s models are basically lab experiments, which means officials will be working with projections that reflect an incrementally worse growth-inflation mix.

10-year Treasury yields have come in meaningfully (~55bps) from their mid-January highs, a reflection of worsening US growth prospects. Some strategists argue lower bond yields are a market-based automatic stabilizer, a contention which (conveniently) fits with rhetoric from Scott Bessent, who’s intimated that at least on that score, the benefits of “Trump 2.0” are accruing to Main Street already in the form of e.g., lower mortgage rates. Someone forget to tell households. As noted above, sentiment’s abysmal.

Notwithstanding that Powell doesn’t goal-seek the median dot, it’d be preferable if the new dot plot retained the “guidance” (I know, I know, “The dots aren’t a plan!”) for 50bps this year. Since the last SEP, the inflation outlook’s unchanged at best, the growth outlook’s plainly worse, “policy clarity” isn’t forthcoming and the market’s at 2.5 “cuts.” So why not take the “free” option of an unchanged median dot which splits the difference with short-end traders?

The risks of a hawkish shift (i.e., a dot plot that tips just one cut for 2025) are myriad. Wobbly stocks would have a very difficult time with such an outcome and the curve would likely exhibit a pretty sharp bull flattener as the long-end incorporates a hard landing from a Fed too constrained by inflation to rescue the flagging growth impulse.

A dovish shift (i.e., a dot plot that tips three cuts for 2025) is demonstrably less risky, but it’d put Powell in the uncomfortable position of having to reconcile an inclination to cut rates faster in the presence of rapidly worsening inflation expectations, core inflation still loitering ~1ppt above target and the median core PCE forecast for this year very likely to move up in the new projections.

So, if it’s clarity you seek from the Fed, you’re going to be disappointed this week. The Committee’s still in “wait-and-see” mode, and as BMO’s Ian Lyngen remarked, that’ll feel decidedly unsatisfying to some market participants. But, he went on, in the same note, “the reality is that policymakers still aren’t in a position to give concrete guidance on the net implications from the policies being enacted inside the beltway.”