Fed rate cut hopes: While the Federal Reserve is not expected to make any changes to interest rates at its upcoming policy meeting, the focus shifts to whether officials will maintain their previous outlook for rate cuts, given the ongoing outperformance of the economy.

Recent data has affirmed policymakers' belief that interest rates will decrease this year, with Fed Chair Jerome Powell indicating the central bank's proximity to gaining confidence in declining inflation, potentially paving the way for rate reductions.

However, the Fed's new projections will reveal whether policymakers anticipate fewer rate cuts than the three estimated in December, or if they foresee continued economic expansion alongside falling inflation, allowing for rate adjustments.

Investors, anticipating a June start to rate cuts, will keenly observe the Fed's meeting on March 19-20 for signals. The policy rate has remained within a 5.25-5.5 per cent range since July, a period between the last rate hike and anticipated cuts.

With December's projections suggesting at least three quarter-point cuts this year, a shift in the median forecast due to a more hawkish stance from a few officials could alter expectations.

The release of key data, including the Consumer Price Index for February, will further influence Fed decisions. Despite investor expectations of a June rate cut and projections of a full percentage point reduction this year, data since December has presented mixed signals.

While the February jobs report revealed an increase in the unemployment rate and slowed wage growth, it also indicated robust hiring and steady labour force participation, suggesting underlying economic strength.

The Fed's Beige Book reports have indicated steady or growing activity across regional districts, with concerns about potential inflationary pressures arising from pent-up demand.

While inflation data has shown mixed trends, with housing costs escalating but wholesale prices moderating, Fed officials remain cautious about declaring inflation trends or predicting the timing of rate cuts definitively.

Some Fed members, including Governor Christopher Waller, emphasize the need for patience given the strength of economic indicators, while others like Governor Michelle Bowman highlight potential inflation risks from rising asset prices and relaxed financial conditions.

(With Reuters inputs)