FXStreet reports that economists at MUFG Bank believe Powell has a really tough job to convince the markets of the sustainability of the Fed’s ultra dovish stance. 

“The DOTs plot will be one key area of focus and at the margin we see the median DOT for the timing of the first rate increase remaining in 2024 – four FOMC members would need to bring forward their view to 2023 in order to see the median shift to 2023. That’s certainly feasible and wouldn’t be a huge surprise given the scale of increase in macro estimates we are likely to see following the $1.9trn fiscal stimulus that’s about to start hitting the economy. 

“While we may well get to a point this year when the Fed deems it necessary to signal a slowing of the current $20 B per month pace of QE, tonight is certainly not the time for that.”

“We maintain that Powell has a difficult job to convince the markets on the maintenance of the dovish stance. Even with low inflation forecasts; no shift in the DOT plot and strong dovish words, we see limited scope for yields to decline much over the short-term and see risks for the US dollar still skewed to the upside for now.”