Free Trial

Citi Preview: Debating Forward Guidance


Citi FOMC Preview: Most interesting at this meeting is discussion around
forward guidance, which will likely be delivered in September.
Fwd Guidance: Broad-based support on FOMC for formal outcome-based
guidance. The interesting debate at this meeting, likely most evident in
minutes released Aug 19, will be the exact form and wording of that guidance.

- Best guess: FOMC leans toward phrasing that indicates some comfort with
overshooting 2% target – but does not explicitly guarantee an overshoot.

- More dovish: committing to overshoot for a period of time.

- More hawkish: simply stating hikes will not commence until inflation is on
clear path to being at-target.

- Any fwd guidance likely to be consistent with far-forward pricing of likely
first hike, which means market reaction will be muted.

- May also have unemployment component, but choosing appropriate threshold
difficult and possibly contentious given significant uncertainty over both the
path of employment and labor force participation.

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.