Morning from Copenhagen.

Powell struck a noticeably dovish tone at yesterday’s FOMC press conference. It’s clear the Fed is biased toward cutting, even as they hesitate to act immediately—meaning they maintain a dovish stance despite a re-accelerating economy (read: bullish). While the Fed has historically led the way among central banks, it now seems like other G7 central banks are setting the tone.

It’s difficult for the Fed to lean hawkish when nearly every other central bank is moving toward further rate cuts. The U.S. economy is arguably the only place where monetary policy has yet to significantly slow economic momentum.

The base case remains that the Fed will cut rates twice this year, beginning sometime in the summer. However, the more interesting aspect is their evolving rhetoric on monetary policy. The phrase “made progress towards 2%” was removed from the statement compared to December, which, at first glance, seemed hawkish. Risk assets initially reacted negatively, but Powell clarified during the press conference that the Fed is satisfied with the current policy path and economic conditions. More importantly, he didn’t frame the situation as a re-acceleration.

On inflation, Powell explicitly stated that removing the “inflation progress” remark was not meant as a signal. He reinforced this by saying, “If inflation is not moving towards target, the conclusion is to stay where we are.” This suggests that even if inflation prints run hot over the next few months, the Fed will hold steady rather than hike—effectively taking rate increases off the table. That’s a strong signal for both the USD and bond yields to soften further, while equities stand to benefit.