The Morning Edge: Fed Signals Potential Overhaul of Key Rate Forecast Tool

Federal Reserve Chair Jerome Powell hinted at possible changes to the central bank’s influential "dot plot" interest-rate projections, sparking intrigue across financial markets. Speaking at a New York research conference, Powell revealed that the Fed is reviewing its communication strategies, including the Summary of Economic Projections, which outlines policymakers' forecasts for growth, unemployment, inflation, and interest rates. The dot plot, a visual representation of individual rate projections, has long been a cornerstone of the Fed’s transparency efforts, guiding economists and investors in anticipating policy moves.

While supporters argue the dot plot has been instrumental in shaping market expectations—such as during the post-financial crisis era when it signalled prolonged near-zero rates—critics question its effectiveness in today’s complex economic landscape. With the review set to conclude by summer’s end, markets are bracing for potential shifts in how the Fed communicates its policy outlook, a move that could reshape investor strategies and market dynamics in the months ahead. 

Data
The US labour market showed mixed signals in February, with nonfarm payrolls rising by 151,000 jobs, up from a downwardly revised 125,000 in January, according to the Labor Department’s Bureau of Labor Statistics. However, the unemployment rate edged up to 4.1% from 4.0%, reflecting a 588,000 decline in household employment and a drop of 385,000 people leaving the labour force, signalling waning confidence in job prospects. The labour force participation rate fell to a two-year low of 62.4%, down from 62.6% in January, while a broader measure of unemployment surged to near a 3½-year high as part-time workers increased. These trends highlight emerging cracks in the labour market, potentially exacerbated by chaotic trade policies and federal spending cuts, raising concerns about economic growth this year.

Markets
Overnight
US stock indexes closed higher on Friday, recovering from early losses after FedChair Powell reassured markets by stating the economy was "in a good place." However, lingering uncertainty over US trade policy contributed to Wall Street’s steepest weekly decline in months. In extended trading, shares of DoorDash, Williams-Sonoma, Expand Energy, and TKO Group rose following news they would join the S&P 500, with the changes set to take effect before trading begins on Monday, March 24, according to S&P Dow Jones Indices. Despite Friday’s gains, all three major indexes posted weekly losses, with the Nasdaq confirming a 10% drop from its December peak in the previous session.

US Treasury yields initially dipped after data revealed weaker-than-expected US job growth for last month, fuelling concerns about economic momentum and boosting market expectations for Federal Reserve rate cuts this year. However, yields reversed course following remarks from Fed Powell, who expressed optimism about the US economy’s strength and downplayed immediate inflationary risks from the Trump administration’s tariff plans. The yield on the benchmark 10-year Treasury note rose 3.8 basis points to 4.32%, putting it on track to end a five-week losing streak with a weekly gain of about 9 basis points. The shift indicates a market considering growth concerns alongside the Fed's careful approach to inflation and monetary policy.

The US dollar tumbled to multi-month lows against the euro and yen on Friday, extending losses against most currencies after data revealed weaker-than-expected job growth in the world’s largest economy. The report reinforced expectations that the Fed will cut interest rates multiple times this year, with the first reduction likely in June. The dollar index, which measures the greenback against six major currencies, fell 0.4% to 103.81, hitting its lowest level since early November and marking a 3.5% weekly decline—its worst performance since November 2022. The labour market slowdown has heightened bets on a dovish shift in Fed policy, further pressuring the dollar.

Brent crude oil prices rose on Friday but pulled back from earlier highs after US President Donald Trump threatened sanctions on Russia if it fails to agree to a ceasefire with Ukraine. In a post on Truth Social, Trump stated he was "strongly considering" sanctions on Russian banks and tariffs on Russian products due to ongoing military attacks in Ukraine. Brent crude futures settled at $70.36 a barrel, gaining 90 cents, or 1.3%, as the market weighed geopolitical risks against supply concerns. 

 Metrics

Day’s Ledger

Economy

• Japan January current account data

Companies

• AGI Infra board to consider interim dividend
• Hindustan Zinc board to discuss fundraising plans
• Housing & Urban Development Corp board to consider dividend
• Iykot Hitech Toolroom board to consider rights share issue

Policy

• India Budget session resumes
• Maharashtra, Assam to present Budget for FY26
• Eurogroup Meetings
• European Union-India round of trade talks

Tickers

• ALEMBIC PHARMACEUTICALS informed that USFDA has issued Form 483 with one procedural observation to the company's bioequivalence facility in Vadodara.
• BHARAT PETROLEUM CORP planning to float a four-month tender this week to buy US West Texas Intermediate crude as it eyes cheaper oil from the world's top producer.
• GENSOL ENGINEERING promoters have sold 2.37% of their total equity.
• GMR AIRPORTS has acquired an additional 10% stake in its subsidiary, Delhi International Airport (DIAL), from Fraport AG Frankfurt Airport Services Worldwide. 
• INDUSIND BANK has informed that RBI has approved the reappointment of Sumant Kathpalia as MD & CEO for a year.
• IRB INFRASTRUCTURE DEVELOPERS’ February toll collections up 14.4% to ₹5.29 billion.
• IREDA has informed that the RBI denied permission for equity investment for development and implementation of 900 MW Upper Karnali Hydro Electric Power Project in Nepal.
• JSW STEEL’s crude steel production rose 12% on year to 2.41 million tonnes in February. 
• LUPIN launches Rivaroxaban tablets in the US following final drug approval for its ANDA. Rivaroxaban is used to reduce the risk of major cardiovascular events in patients with coronary artery disease.
• Omaxe's subsidiary Omaxe World Street has launched New Singapore in Faridabad, with a project value of ₹6 billion.
• SHILPA MEDICARE informed that USFDA issues form 483 with one observation for Raichur-based unit-1 of its arm Shilpa Lifesciences.
• TATA POWER’s subsidiary s  Tata Power Renewable Energy signs MoU with Andhra Pradesh Government to develop up to 7,000 MW of renewable energy projects..

Must Read

• HCL founder Shiv Nadar transfers 47% stake to daughter Roshni
• USFDA pulls up Granules India for lapses in maintaining storage facilities at Telangana plant
• DLF to invest ₹60 billion to construct 7.5 million sq ft office, retail spaces in Gurugram
• Govt levies 10% duty on masur dal
• GST rate cut soon, tax review in final stages, says FM Nirmala Sitharaman
• India's M&A market expected to stay resilient despite market correction
• Indian agriculture sector must open up, says US Commerce Secretary
• China’s consumer inflation turns negative for the first time in 13 months
• Musk Calls on US to Quit NATO, Stop Paying for Defense of Europe
• Mark Carney wins race to succeed Justin Trudeau as Canada PM
• Trump says Russia easier to deal with than Ukraine in push for peace

Daily Mantra
I don't believe you have to be better than everybody else. I believe you have to be better than you ever thought you could be. - Ken Venturi

Musings

Rise of the Machines: Algorithms Overhaul FX Trading

Currency trading is undergoing a seismic shift as algorithms take the reins, handling over 75% of FX market trades. BNP Paribas has introduced sophisticated algorithms like Viper, Iguana, and Chameleon within their Rex trading platform, streamlining processes for hedge fund managers and corporate treasurers. Major banks like JPMorgan Chase and Goldman Sachs are also advancing their algorithmic technologies to keep pace with rivals such as Citadel Securities and XTX Markets. This rapid transition, from just 22% algorithmic trading pre-pandemic to nearly 50% today, is transforming the trading floor’s dynamics. The once noisy and bustling environment is now dominated by the hum of computers. While the shift reduces costs for clients, it also brings new risks and slimmer profit margins for banks. Despite these challenges, the drive towards automated efficiency remains strong, reshaping the future of FX trading.  - Chetan Chandak 

Chetan is a published author and a dabbler in mysticism. By day, he trades currency derivatives at an Indian private bank; after hours, he delves into ideas beyond the numbers. His musings—part reflection, part curiosity—are his own and don’t represent views of his bank