The market has settled on 25 bps as the highly-probably outcome of today's FOMC meeting. The bank run appears to have ended, though First Republic remains on life support and more ratings agency downgrades are likely to come.
In any case, it's stable enough for the Fed to move ahead with 25 bps, as the market prices a 85% chance that's what unfolds today.
The bigger question is what happens next. Assuming the Fed hikes to 4.75-5.00% today, the market is then pricing a 50/50 chance of another hike in May to 5.00-5.25% and that will be followed by a reversal to 4.42% at year end. Notably though, those December numbers have been making major moves in the past two weeks, falling as low as 3.70% at the peak of the turmoil.
The problem is that the Fed may be partially blocking themselves in with the dot plot exercise. That could be mitigated by wider breadth in the dots and by Powell noting that forecasts are highly uncertain in the press conference.
Overall, it will be a delicate exercise that risks shattering the fragile calm in markets.
The decision and dots are out at 2 pm ET and a press conference will follow 30 minutes later.