BNP Paribas`s FOMC preview sees them sticking...>

FED: BNP Paribas`s FOMC preview sees them sticking to their call for 25bps cuts

in July and September (a view unchanged since even before the June FOMC).

- Sees immediate end of balance sheet reduction, with maturing Tsys reinvested

and MBS prepayments reinvested back into Tsys (per NY Fed's Statement).

- Otherwise relatively little expected besides, with changes to the statement

limited to 'a few mark-to-markets on current conditions'.

- FOMC to say uncertainties 'remain elevated', vs June's 'have increased'.

- Hawkish risks: balance of risk assessment upgraded due to lower Funds rate,

which would signal less appetite for further cuts. Also any marginal

acknowledgement by Powell of strong June data to this point.

- Dovish risk: similar language from Powell on 'dramatic' series of rate cuts in

same vein of NY Fed Pres Williams' comments on Jul 18.

- 1995-96 period best parallel to current period. Like the Greenspan Fed, Powell

Fed likely sees 50bps of cuts appropriate, but little reason to do all at once.

- This suggests 25bps cut in Sep then pause to watch evolution of conditions;

another 25bps cut in Q220 likely along w price level target adoption.