When the Federal Open Market Committee announces its monetary policy decision this afternoon, there's scant chance the Fed will raise rates or make significant changes to its asset purchases which are totaling $120B/month. Rather, investors and economists will be focused on the Fed's Summary of Economic Projections (SEP), specifically with an eye to whether any Fed officials move up their expectations for a rate hike in 2023. This will also mark the first real test of the central bank's adherence to its new framework.

Backdrop: Last summer, the Fed committed to letting inflation run above its 2% average for a time to offset years of inflation lagging its target. That change means the Fed won't raise rates until the data shows inflation is on its way to exceeding its target for a considerable amount of time. Chairman Jerome Powell has said in many statements that the central bank will be "patient," or in other words, it doesn't want to slow the recovery by jumping the gun and raising rates too early (that's what happened after the 2008 financial crisis).

To review December's SEP, only one of the 17 Fed officials expected a rate increase next year, and only five of them projected a hike in 2023 as seen in the Fed's so-called dot plot. The December SEP called for median real GDP growth of 4.2% in 2021, 3.2% in 2022 and 2.4% in 2023; median unemployment projection was at 5.0% in 2021, 4.2% in 2022 and 3.7% in 2023. So back in December, the Fed members didn't expect unemployment return to the pre-pandemic level of 3.5% for the next three years and core personal consumption expenditures weren't expected to rise to 2.0% until 2023.

Outlook: Since then, there have been two stimulus plans enacted - $900B in December and $1.9T in March - and investors are now more optimistic about economic growth, but also worried that inflation will surge. The latest economic projections and policy statement are scheduled to be released at 2 p.m. ET, while Powell will hold a news conference 30 minutes later, in an event that could prove tricky for the Fed chief.

Central Banking - What does it all mean for markets?

U.S. bond yields and the dollar could jump if the FOMC's post-meeting statement and Powell's press conference are not deemed dovish enough, but the opposite is also true. Stocks could take off with renewed vigor if runaway inflation fears are put to rest and the Fed strongly commits to an easy money policy stance. Rising interest rates have been an overhang for equities in recent weeks, specifically the tech sector. The jump in yields has forced a shift into value stocks from growth, pushing the Dow Jones and S&P 500 to hover near record highs.

Bank of America's economic team is calling the meeting "one of the most critical events for the Fed in some time." Traders are responding in kind, with stock futures strongly hugging the flatline overnight as they wait to hear more from the Fed before making any big decisions, while the 10-year Treasury yield notched a fresh 13-month high at 1.64%. Let's look at the possible outcomes...

Status quo: "We expect Powell to note the FOMC has the tools to intervene if the bond market becomes disorderly or constrains the economic recovery," wrote analysts of Commonwealth Bank of Australia. "But we expect Powell to push back against talk of policy tightening because of the large amount of labor market slack."

Calming fears: "It's Nirvana for the markets. The Fed is going to keep rates extremely accomodative," said Joseph LaVorgna, former White House chief economist. "The Fed's modus operandi has been time and time again to get inflation higher and now they want to run it hot for a period of time."

No immediate concern: "Powell's been pretty sanguine about the whole increase in yields. We think he'll maintain that stance," said Wells Fargo Securities' Michael Schumacher. "Our view is he will not really try to slow it down."

Reviving Operation Twist: That's where the Fed buys longer-dated bonds and sells shorter-dated bonds to bring down rates at the longer end. "I have a hunch that what was known as Operation Twist may be in our future," legendary bond trader Bill Gross declared. "We might have even had Operation Twist in the last two weeks, but that might just be conjecture on my part."

Expectations are wrong: "Whether it's negative rates or rates which are barely positive, I think that over the course of the next 18 months, we should expect to see a high likelihood that we end up with significantly lower long-term rates than we have today," said Scott Minerd, Guggenheim's global chief investment officer.

Events - GameStopped?

Retail sales fell by a whopping 3% in February from the revised 7.6% advance seen in January, but climbed 6.3% on a year-over-year comparison. Harsh winter weather and the timing of stimulus checks were big factors in the monthly drop that caught economists off guard, though much of that money is expected to head into the stock market when it arrives. In fact, retail investors are likely to buy almost $3B worth of equities when the payments are transferred, according to Vanda Research. That would be around $1.5B more than the typical daily inflow over the previous month and represent "by far the largest single day of buying from retail ever."

Bigger picture: The coming stimulus deluge highlights the increasingly large role retail investors are playing in the world's biggest equity market. It could also set the stage of another retail trading frenzy, though GameStop (NYSE:GME), the poster-WSB/Reddit stock, fell for a second day on Tuesday, leaving it on pace for its worst two days in more than a month.

This is all happening ahead of the latest Congressional hearing on retail investing and short selling. Today, the House Financial Services Committee will continue its investigation into the short squeeze of meme stocks that occurred in late January, convening seven expert witnesses to weigh in with proposals to reform U.S. market structure. That could help the system avoid a repeat of the events, when Robinhood (RBNHD) and other retail brokers restricted purchases of popular stocks to manage a surge in clearinghouse demands for collateral.

Go deeper: Expect the discussion to center around "payment for order flow," regulations between public exchanges and topics surrounding "gamification" of investing. Witnesses include Michael Blaugrund, COO of the New York Stock Exchange (NYSE:ICE), as well as Michael Piwowar, executive director at the Milken Institute and former acting chair of the SEC.

Cryptocurrency - Sotheby's enters the NFT art world

It was only a week ago that Christie's sold a Beeple JPEG collage to an investor who paid $69M in cryptocurrency, but it may have marked the beginning of the digital art revolution. Rival auction house Sotheby's is joining the non-fungible token craze through a collaboration with digital artist Pak. It's also considering an option to eventually allow collectors to pay, and potentially get paid, using digital currencies.

Quote: "We've been following the NFT space for some time," Sotheby's CEO Charles Stewart declared. "In the last 12-18 months there has been an acceleration in everything digital. In the art world, there's been a pivot towards digital in almost everything, perhaps, except the art. Now we're getting there with the art as well."

Skeptics note the ascent of NFTs has coincided with a massive crypto rally and have dismissed them as a fad whose values will fall over time. Others, like ARK Invest, feel NFTs will "unlock more value for content creators than any platform in history."

Outlook: A move to accept digital currencies for physical works or NFTs could potentially fuel sales if it prompts crypto millionaires to start bidding on high-end art. The demographic could also help prop up the market, which leaned heavily on millennials to lift slumping sales last year and has struggled with fresh art auctions due to the coronavirus pandemic.

Product - Safer dates

Match Group (MTCH), the parent company of Tinder, Match, OkCupid and other dating services, has made a seven-figure investment into a non-profit called Garbo, enabling the latter to accelerate a national expansion. The background check platform allows users to view criminal records, court actions and public information of prospective dates using only their name or mobile number. Match hopes to integrate Garbo's background check technology into Tinder later this year, followed by its other U.S. dating apps.

Backdrop: Garbo was founded in 2018 by Kathryn Kosmides, a "survivor of gender-based violence" who wanted to make it easier to find information about people users may meet online. The platform aggregates numerous data sources to provide details on an individual, including "arrests, convictions, restraining orders, harassment, and other violent crimes." The service also performs what it calls an "equitable background" check, which means it excludes drug possession charges from its results, as well as traffic tickets.

"This is an industry first," said Tracey Breeden, head of Safety and Social Advocacy for Match Group. "For far too long women and marginalized groups in all corners of the world have faced many barriers to resources and safety. We recognize corporations can play a key role in helping remove those barriers with technology and true collaboration rooted in action." The news may also take aim at Bumble (BMBL), which requires women to reach out first in hetero dating situations.

Bottom line: The move by Match is part of a broader effort to rethink safety across its services. Late last year, Match hired Breeden as its first head of safety and partnered with the Rape, Abuse & Incest National Network to audit the company's assault prevention systems. In early 2020, the company also invested in Noonlight - to help it power new safety features inside Tinder - and included a new date check-in feature and photo verification.