TD Securities predicts that the Federal Open Market Committee (FOMC) will keep interest rates steady in its upcoming meeting. They foresee possible rate cuts starting in March. The outlook for stronger GDP growth comes from rising personal spending and expected tax refunds. Economic activity is likely to stay robust in early 2026, which will impact the Federal Reserve’s decisions. While the FOMC’s risk management cuts have concluded, there is now a greater focus on data to support any further rate adjustments. Jerome Powell, the Fed Chair, may express uncertainty about immediate rate cuts but will reinforce the possibility of easing within the year.

Market Insight and Investor Guidance

This information is for informational purposes only and does not serve as a recommendation to buy or sell assets. Readers are encouraged to conduct their own research since investing in public markets carries risks. Markets change quickly, and FXStreet aims to keep investors updated on these changes. FXStreet and its authors are not responsible for any errors, and readers should consult their guidelines before using market data. The article also provides broader insights, including Dow Jones performance and currency policy forecasts, to give a complete financial overview. Statements about future financial markets involve uncertainties and require careful consideration from investors. All investment risks, costs, and possible emotional stress are the responsibility of the investor. With the FOMC likely to maintain current rates this week, we can expect a stronger US Dollar. The recent estimate for Q4 2025 GDP showed an unexpected 2.9% annualized growth due to solid consumer spending, giving the Fed the space to wait. This scenario suggests considering short-term call options on the dollar index (DXY) or put options on currency pairs like EUR/USD.

FOMC Strategic Considerations

This upcoming meeting marks a transition from the “risk management” cuts made in the latter half of 2025, aimed at easing restrictive policies. With the economy showing strength, there is now a stronger case for rate cuts. Traders should explore strategies that benefit from increased volatility, like straddles on major indices before the announcement. Pay close attention to market pricing, as fed funds futures show around a 65% chance of a rate cut by the March meeting. If the Fed’s statement appears noncommittal, these odds may decrease, resulting in a quick shift in short-term interest rate futures. This creates opportunities for those anticipating a more hawkish tone from the central bank. The strong labor market, which added 210,000 jobs in December 2025, along with a core inflation rate of 3.1%, supports this cautious approach. This economic scenario could put pressure on equity index futures, as delayed rate cuts may temper the S&P 500’s rally. We should be ready for a possible pullback if the market interprets the Fed’s message as “higher for longer.” Reflecting on 2025, markets consistently tried to predict the Fed’s moves, similar to what we observed in late 2023. We believe the central bank will use this meeting to counter the market’s aggressive easing expectations. This indicates a positioning for a flatter yield curve, with near-term bond yields likely remaining high while longer-term yields stabilize due to expected easing. Create your live VT Markets account and start trading now.

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