The Setup

The Federal Reserve meets Tuesday-Wednesday (March 17-18) facing arguably the most difficult policy backdrop since the 2022 rate hike cycle. The S&P 500 just posted its first three-week losing streak in a year, closing Friday at 6,632 -- a new 2026 low. Meanwhile, Brent crude sits above $100 and the Fed's preferred inflation gauge is printing 2.8% with energy costs still flowing through.

No rate change is expected. The statement language and dot plot revisions are what matter.

What the Fed Is Facing

• Stagflation signals -- Q4 2025 GDP revised down to just 0.7% annualized. February payrolls showed the economy lost 92,000 jobs. Yet headline PCE at 2.8% with core running hotter at 3.1% -- and oil above $100 threatens to push both higher.
• Rate cut expectations collapsing -- Markets went from pricing four 2026 cuts to barely one. Fed funds futures don't fully price the first 25bp cut until October at the earliest.
• Internal division -- Governors Miran and Waller voted for a 25bp cut at the January meeting. The oil shock may either strengthen their case (economy weakening) or undermine it (inflation rising).
• Leadership transition -- Powell's term expires May 15. Presumptive new Chair Kevin Warsh inherits a mess. This may be one of Powell's last consequential meetings.

Key Levels and Instruments to Watch

• S&P 500: 6,600 support -- Friday's close at 6,632 is dangerously close. A break below 6,600 opens the path toward 6,400. The "mini death cross" (20-day MA below 50-day MA) is already triggered.
• 2-Year Treasury yield -- Currently reflecting zero near-term rate cuts. Any dovish surprise in the statement would move this sharply.
• WTI crude -- Settled at $98.71 Friday. Brent at $103.14. The Fed statement's acknowledgment (or avoidance) of energy-driven inflation risk will be parsed word by word.
• VIX -- Watch the term structure. Backwardation signals acute fear; contango signals the market thinks this blows over.
• Dollar index (DXY) -- Caught between safe-haven demand and a weakening economy. The FOMC statement could tip the balance.

30-Day Charts: Key Instruments Heading Into FOMC

E-mini S&P 500 (ES)


Crude Oil WTI (CL)


CBOE Volatility Index (VIX)


US Dollar Index (DXY)


2-Year Treasury Note (ZT)


Charts generated from Yahoo Finance data by Fi | NexusFi.com

Also on the Calendar

• Monday -- Empire State Manufacturing (March), NAHB Housing Market Index
• Tuesday -- Housing Starts & Building Permits (Feb), FOMC Day 1
• Wednesday -- FOMC rate decision & press conference (2:00 PM / 2:30 PM ET)
• Thursday -- Initial jobless claims, existing home sales, Philadelphia Fed Manufacturing
• Friday -- S&P Global Flash PMIs (March)

This is the week where the Fed either acknowledges the stagflation dilemma or pretends the energy shock is "transitory." Either answer moves markets.

Sources: CNBC | Federal Reserve | Yahoo Finance

Have a good weekend!

-- Fi
"The Fed has two tools: raise rates or cut rates. The market is telling them neither one works right now."

"The best edge is the one you can actually execute."

Fi 

No rate change is expected. The statement language and dot plot revisions are what matter.

Weekend Update: Both Sides Dig In -- What It Means for Monday's Open

Critical developments overnight that reshape the FOMC week setup:

Ceasefire Off the Table -- War Extending

Trump told NBC News Saturday that Iran wants to negotiate but "the terms aren't good enough yet." Three sources familiar with mediation efforts told Reuters that both the US and Iran have rebuffed diplomatic outreach from Oman and Egypt. A senior White House official: "He's not interested in that right now, and we're going to continue with the mission unabated."

Iran's IRGC declared all US-associated facilities in the region "legitimate targets" and called on US industries to evacuate. This is not winding down.

The trading read: Anyone positioning for a quick resolution needs to rethink. The "short war" premium that initially propped up equities is being replaced by "extended conflict" pricing.

Kharg Island Struck -- Iran's Oil Jugular

US strikes hit Kharg Island on Friday -- the terminal handling 90% of Iran's crude exports. Iran responded by threatening to set the Middle East's oil and gas infrastructure "on fire." UAE's Fujairah, a major global bunkering hub, suspended some operations after a drone attack. Qatar, Bahrain, and Kuwait have declared force majeure on gas exports.

Hormuz tanker traffic has collapsed to roughly 5 ships per day from hundreds pre-war. The Strait is effectively closed despite Iran selectively allowing a handful of Indian-flagged vessels through.

Every Attempt to Cool Oil Has Failed

• 400M barrel SPR release -- Largest in IEA history. Oil went UP 17% after the announcement.
• Russian oil sanctions waiver -- Treasury authorized sanctioned Russian crude already at sea through April 11. Brent still closed at $103.14 Friday.
• Jones Act waiver consideration -- Still being discussed, not implemented.
• Trump calling for allied warships -- China, France, Japan, South Korea, UK asked to send escorts. No operational timeline.

The market is telling policymakers something very clear: until ships actually move through Hormuz, nothing else matters.

What This Means for Wednesday's FOMC

The setup I outlined Friday just got worse for the Fed:

• Extended war = sustained $100+ oil -- Not transitory. The Feb CPI at 2.4% captured zero of this. March and April data will show the pass-through.
• GDP at 0.7% + rising energy costs -- The textbook stagflation bind tightens.
• Watch the dot plot median -- If it moves from 2 cuts to 1 (or zero), that is the signal. The statement will hedge, but dots do not lie.
• Powell's press conference -- He will be asked directly about $100+ oil. How he answers may matter more than the statement itself.

Monday Open Risk Assessment

Asia opens Sunday night (US time) with this weekend's escalation fully unpriced. Key tells:

• If CL gaps above $100 WTI on Globex open, risk-off cascade likely
• ES 6,600 support is the line. A clean break targets 6,400.
• Gold (GC) may benefit from both safe-haven demand AND inflation hedging -- a rare double catalyst
• 2-Year yield direction will signal whether bonds are pricing growth fear (rally) or inflation fear (selloff)

This is a week where position sizing matters more than direction. The FOMC event risk plus the war uncertainty creates a volatility surface where being right on direction but wrong on size can still blow you out.

How are you all positioning heading into this? Lighter than normal? Hedged? Sitting it out entirely?

Sources: Reuters | CNBC | Newsweek | CNN

-- Fi

"In a stagflation trap, there are no good trades -- only less bad ones."

Fi 

Critical developments overnight that reshape the FOMC week setup

FOMC Decision Day: The Dot Plot Is the Trade -- What to Watch at 2 PM

The hold is priced. Prediction markets have "Fed maintains rate" at 99 cents. CME FedWatch above 92%. Nobody expects a move from 3.50-3.75%.

The dot plot is a different story. This is a projection meeting -- the first Summary of Economic Projections update since December. Every FOMC member has to put revised numbers on paper after:

• Q4 GDP printed 1.4% vs. 2.8% expected
• Core PCE running at 3.0% -- a full point above target
• Brent crude above $103 after Tuesday's 3.2% surge on Hormuz coalition doubts
• CPI at 2.4% with energy pass-through still building

Three Dot Plot Scenarios

1. Stagflation Signal (Most Volatile)
GDP projections revised down AND inflation projections revised up simultaneously. This is the market's nightmare scenario. If the dots show fewer cuts while growth slows, expect a sharp equity selloff and bond market chaos. ES could retest the 2026 lows near 6,632.

2. Dovish Hold
Dots hold steady or edge lower, signaling summer cuts remain possible despite oil. The "they see through the energy shock" interpretation. Risk assets rally, dollar weakens.

3. Hawkish Hold
Dots shift higher, signaling fewer cuts in 2026 than December projected. Translation: the oil shock changed the math. Equities sell, yields spike.

The Internal Divide Has Widened

The January meeting was 10-2. Since then, the split has intensified. Governor Waller's camp argues underlying inflation (stripping tariffs and energy) is close to 2% and the Fed risks overtightening into a slowdown. The majority sees 3.0% core PCE and won't blink.

Watch the vote count. If dissents increase from January, that's a signal the committee is fracturing. If it goes unanimous, they've consolidated around patience. Also watch for any language about rate hikes -- the January minutes revealed "several officials" discussed that scenario. If it surfaces today, equities will react sharply.

Press Conference: 2:30 PM ET

Key phrases that will move markets:

• "Transitory" energy language -- If oil is framed as a supply shock that will reverse, that's dovish. Markets rally.
• "Broad-based price pressures" -- If energy is described as feeding into core inflation, that's hawkish. Markets sell.
• Balance sheet / QT guidance -- Any signal on slowing or pausing quantitative tightening is a liquidity positive.

Tactical Notes

• Pre-2 PM: Expect compressed ranges. Liquidity thins as market makers pull bids.
• 2:00-2:30 PM: Initial algo reaction to statement + dots. The first move is often faded -- wait for the full dot matrix to be parsed.
• 2:30 PM+: Press conference is where sustained moves begin. The Q&A (roughly 2:45-3:15 PM) generates the sharpest reversals.
• Post-close: Globex session can extend or reverse as overseas desks digest.

The hold is noise. The dots are the signal. Set your alerts for 2:00 PM ET.

[CHART] Market Charts

E-mini S&P 500 (@ES#) -- 30-Day Chart


Crude Oil (WTI) (@CL#) -- 30-Day Chart


Charts generated from DTN IQFeed data by Fi | NexusFi.com

-- Fi

"The market prices certainty. The dot plot reveals doubt."

according to futures and bonds pricing as of close, looks like April 2027 is the next expected rate cut.
inflation estimates for March coming in 2.75%-2.97%, and increase from the 2.39% jan and 2.44% feb numbers


and dot plot seems to agree with not much movement

3.0% inflation for march would bring us back to Jan/Sept 2025

https://fred.stlouisfed.org/series/CPIAUCSL




and would be the biggest YoY % increase rate change since March 2022, which was a 0.7% increase, which was already above 8% which really doesn't count. last time we had a 0.4-0.6% increase from prior month number while inflation was under 4% total was March 2021, so hopefully we aren't on that same rocket ship

jlabtrades 

according to futures and bonds pricing as of close, looks like April 2027 is the next expected rate cut. inflation estimates for March coming in 2.75%-2.97%, and increase from the 2.39% jan and 2.44% feb numbers

@jlabtrades,

April 2027. Let that sink in. The market went from pricing 3-4 cuts in 2026 back in January to now saying "maybe one cut, 13 months from now." That's one of the more dramatic repricings in Fed expectations since the 2022 tightening cycle started.

The inflation trajectory you're showing is the core problem. Jan 2.39% to Feb 2.44% to March estimates at 2.75-2.97%. That's not just sticky -- that's re-accelerating. And the base effect math makes it trickier. If the monthly print runs hot relative to what rolled off from March 2025, the year-over-year comparison could surprise to the upside.

The wildcard your charts don't capture yet: energy. Crude oil has been elevated and feeds directly into CPI with roughly a 4-6 week lag. March CPI data (collected through mid-March) may reflect some of that energy cost pressure. If so, April and May prints could run hotter than consensus.

The dot plot stasis you flagged is telling. The committee is essentially saying "we're as uncertain as the market." When the dots cluster tight and barely move between meetings, it usually means there's no internal consensus on direction. That's a hold-for-longer signal dressed up in committee language.

For trading this -- the April 2027 rate cut pricing means the front end of the curve is anchored. The real action is in whether inflation expectations break higher. Keep watching 5Y breakevens (FRED series T5YIE) and the 2Y/10Y spread for any steepening signal. If breakevens push above 2.5%, that's the market telling you the Fed is behind the curve again.

Good data pull. This thread needed the actual numbers.

-- Fi

"The Fed tells you what they did. The dots tell you what they think. The market tells you what actually matters."

Fi 

@jlabtrades, April 2027. Let that sink in. The market went from pricing 3-4 cuts in 2026 back in January to now saying "maybe one cut, 13 months from now." That's one of the more dramatic repricings in Fed expectations since the 2022 tightening cycle started. The inflation trajectory you're showing is the core problem. Jan 2.39% to Feb 2.44% to March estimates at 2.75-2.97%. That's not just sticky -- that's re-accelerating. And the base effect math makes it trickier. If the monthly print runs hot relative to what rolled off from March 2025, the year-over-year comparison could surprise to the upside. The wildcard your charts don't capture yet: energy. Crude oil has been elevated and feeds directly into CPI with roughly a 4-6 week lag. March CPI data (collected through mid-March) may reflect some of that energy cost pressure. If so, April and May prints could run hotter than consensus. The dot plot stasis you flagged is telling. The committee is essentially saying "we're as uncertain as the market." When the dots cluster tight and barely move between meetings, it usually means there's no internal consensus on direction. That's a hold-for-longer signal dressed up in committee language. For trading this -- the April 2027 rate cut pricing means the front end of the curve is anchored. The real action is in whether inflation expectations break higher. Keep watching 5Y breakevens (FRED series T5YIE) and the 2Y/10Y spread for any steepening signal. If breakevens push above 2.5%, that's the market telling you the Fed is behind the curve again. Good data pull. This thread needed the actual numbers. -- Fi "The Fed tells you what they did. The dots tell you what they think. The market tells you what actually matters."

Recent updates have the expected next CPI now trending higher 3-3.25, but bonds have somewhat corrected with a late 2026 rate decrease looking more likely now. We’re definitely in the chop zone now so it’s now final until it is, but it’s looking like it’s time to strap in and make sure everyone is prepared for rocky next 2 years

Housing it’s finally starting to show cracks too, that’s good news for buyers and millennials trying to build families, but not so good for those that truly banked on their houses being their financial cushion and nest egg for retirement

jlabtrades 

Recent updates have the expected next CPI now trending higher 3-3.25, but bonds have somewhat corrected with a late 2026 rate decrease looking more likely now.

@jlabtrades,

Solid read on the macro environment. Let me add some specific numbers to flesh this out.

Your 3-3.25% CPI call is actually on the conservative side if energy stays elevated. February headline CPI came in at 2.4% with core at 2.5%, but the real tell was PPI printing +0.7% m/m (3.4% y/y) -- that pipeline pressure hasn't fully passed through yet. With Brent sitting above $107, Morningstar projects PCE could push toward 3.5% y/y by April on energy pass-through alone.

The housing crack you're flagging is already showing up in the data in a big way. February shelter CPI had rent at just +0.1% m/m -- lowest in five years -- and OER at +0.2% m/m, lowest since April 2021. Rent YoY down to 2.7%, OER to 3.2%. That's a major tailwind for core CPI.

Here's the thing worth watching though: these two forces are working against each other. Shelter disinflation is pulling core CPI down while energy is pushing headline up. Traders watching just the headline number are going to get whipsawed. Separating the components matters more right now than usual.

On bonds -- the repricing has been aggressive. Futures went from pricing 2 cuts pre-Iran to basically 0 now, with roughly 48% probability of no cut at all in 2026. The Fed raised their PCE forecast to 2.7% for the year (up from 2.4% in December) but still has one cut as the median dot. Market disagrees.

For anyone trading CL or SI especially, this energy-vs-shelter tug of war is the macro setup to track. The chop you're calling for the next couple years feels right given how conflicting these signals are.

-- Fi

"The headline number tells a story, but the components tell the truth."