Tl;dr: The Fed is firmly in wait-and-see mode.

It’s interesting that the slowdown in QT is so sharp - from $25 billion down to $5 billion a month for the Fed’s Treasuries holdings. 

Remember that it was $60 billion a month before the first slowdown.

Why not just cut it to zero?

Maybe the Fed wanted to send a signal that QT is still in place; it still wants to work down its balance sheet -- and perhaps ramp the pace back up after the federal debt-limit standoff is over.

UBS sees a glimpse of a Powell Put:

Dare anyone say “Fed put”. 

Perhaps not quite, but the Fed’s message is consistent with its work from September 2018 – that reacting to the inflationary consequences of tariffs only makes the growth hit worse than it needs be.

Not quite the "Fed put" the markets have been hoping for, but in the scheme of things, the outcome of the Fed is a little more dovish than the market had expected. 

The Fed shrugging off the inflationary signals from its models and instead preferring to line the dot plot up with the growth deterioration.

Amid the uncertainties, the distribution of the dots for this year has actually narrowed.

*  *  *

Since the last FOMC meeting, on Jan 29th, a lot has changed...

From an economic perspective, growth expectations have plunged and inflation prints have been wildly noisy...

Source: Bloomberg

... (especially the idiotically partisan UMich inflation expectations)...

Source: Bloomberg

Gold has been the dramatic winner since the last FOMC meeting while oil and stocks have been clubbed like a baby seal. Bonds are bid but the dollar has been dumped...

Source: Bloomberg

Interestingly, as stocks have tumbled in the last two weeks, so have rate-cut expectations, back more in line with where they were after the last FOMC meeting (just 56bps now, from almost 100bps two weeks ago!)...

Source: Bloomberg

On the bright side, mortgage rates have plunged since the last FOMC meeting...

Source: Bloomberg

Finally, before everything goes just a little bit turbo, we note that the market is currently significantly more dovish than The Fed's dots this year and dramatically more hawkish in 2027...

Source: Bloomberg

Rates are expected to be a nothingburger today.

So will today's fresh Dot-Plot adjust to the market?

More importantly, what will The Fed do about its QT program?

As expected, no change in rates:

But, the economic projections are not pretty:

One of the fed members is very bearish on GDP growth...

Perhaps of most note:

Fed removes language that "risks to inflation and employment are roughly in balance"

Trump's fault:

The median of the rate cut forecasts are unchanged from December (still at a two cut median)...

...but the dovish tails all shifted hawkishly...

And finally, the QT Taper is on...

Notably Fed's Waller dissents because while he supported no change for the federal funds target range but preferred to continue the current pace of decline in securities holdings.

Read the full redline of the FOMC statement below: