There are few reports with market-moving potential in the March 27 week. Most of the data will add a nuance to what is already known regarding conditions in the housing market in February, the state of consumer confidence in March, and the tone of the surveys of manufacturing and services for March.
The third and final estimate of GDP for the fourth quarter 2022 will be reported at 8:30 ET on Thursday. With the first quarter 2023 already nearing its end, there is far more interest in economic conditions in the January-March period. The GDP Nowcasts from the St. Louis Fed (down 1.0 percent) and the Atlanta Fed (up 3.2 percent) are telling two very different stories at this point. There are still a couple of significant data releases yet to come that could alter the respective forecasts to something similar. Most notable would be the March employment situation at 8:30 ET on April 7, and the retail sales for March on Friday, April 14 at 8:30 ET. So far, it seems like the US economy could eke out another quarter of positive growth.
In the meantime, Fed policymakers will be back in public after the end of the communications blackout period around the March 21-22 FOMC meeting. No comments will be more closely attended to than Vice Chair of Supervision Michael Barr’s appearance before the House Financial Services Committee on Wednesday at 10:00 ET. I would anticipate a lot of political castigation of the Fed’s failure to properly supervise Silicon Valley Bank while also trying to not sound like past rollbacks of regulation were a bad idea, and avoid faulting bank management. Aside from the committee’s posturing, Barr’s written testimony and responses to questioning will be a warning to other banks to clean up their risk management and any overreliance on narrow business sectors.
More broadly, Fed officials will be offering reassurance that the banking system is fundamentally sound and that the provision of liquidity will smooth over any short-term problems for banks. Policymakers are also going to get closely questioned about the 25 basis point increase in short-term rates at the March 21-22 meeting and about future rate hikes. The FOMC statement offers guidance that rates are likely to firm a bit more. The collective forecast in the summary of economic projections indicates that the midpoint of the fed funds target range is expected to reach 5.1 percent by the end of 2023. This means that there is room for only one more 25 basis point increase this year before probable rate reductions next year.
