Federal Reserve Gov. Adriana Kugler said tighter monetary policy has proved to be less impactful on nonbank lenders during the post-pandemic era.

Just as the economy could become topsy turvy, so could the municipal market.

Anna Paulson, executive vice president and director of research at the Federal Reserve Bank of Chicago, will replace outgoing Philadelphia Fed President Patrick Harker.

"In the aftermath of this week's Treasury yield move lower, MMD-UST ratios have reached short-term highs," Barclays strategists said.

The central bank wants to let Trump's policies play out across the economy before deciding which way to move interest rates, and it's too soon to know what the impacts will be, the Federal Reserve chair said.

"With the initial announcement proving to be more aggressive than expected, the market responded overwhelmingly negatively," said Principal Asset's Seema Shah.

Get expert analysis of the May FOMC meeting, inflation outlook, and Powell's comments.

Most of Thursday's issuance came from competitive deals, the largest being the Dormitory Authority of the State of New York with $2 billion-plus and California with $889 billion.

With no policy changes expected, analysts are eagerly awaiting the new Summary of Economic Projections for clues about future monetary policy.

President Trump's selection of Federal Reserve Gov. Michelle Bowman as the next vice chair for supervision comes as banking groups and their allies in Congress asked the administration to fill the position quickly. Bowman was the preferred choice for many in the industry.

"March is not an overly positive month for munis, but a lot will depend on U.S. Treasuries," said Barclays strategist Mikhail Foux.

Federal Reserve Chair Jerome Powell emphasized the need for patience amid uncertainty over the Trump administration's policies, saying there would be no immediate rate changes but that the Fed would proceed carefully.

Mike Goosay, Chief Investment Officer of Global Fixed Income at Principal Asset Management, breaks down the Federal Open Market Committee meeting, Chair Powell's press conference and the SEP.

Inflation is front and center this week, with the consumer price index report released on Wednesday and the producer price index on Thursday.

Investors added $741.7 million to municipal bond mutual funds in the week ending Wednesday, following $2.078 billion of inflows the prior week, according to LSEG Lipper data.

State and local governments are on strong financial footing and are investing in Treasury securities as chaotic federal moves shake out.

Even with the possibility of inflation and fiscal policy-induced headwinds, there is much to be optimistic about in the muni market, despite some possible near-term turbulence, said GW&K strategists.

The Fed meets this week, but the probability of another cut at Wednesday's meeting seems low amid elevated inflation and growth data, said Matt Fabian, a partner at Municipal Market Analytics.

"There are a lot of moving parts here with the potential to either help or hinder the Fed's quest for price stability and maximum employment" this year, noted BMO Deputy Chief Economist Michael Gregory, who says the Fed will "stand pat."

The Fed may make more cuts and there's a floor forming under the Treasury market, per panelists at the Executives' Club of Chicago's Annual Economic Outlook.