Deutsche: Focus Turns To Liftoff

Deutsche sees the forthcoming 8-month, $15B/per, taper timeline as providing the Fed "some flexibility to respond to a rapidly evolving economic environment", though Powell "should note that the Committee will adjust its plans as necessary to achieve appropriate policy settings."

• Statement: Taper to be caveated on monitoring dual mandate goal progress. Also tweak to line on Covid cases (from "rise" to "elevated" cases). Possible "transitory" inflation description will be replaced, perhaps with "Inflation is elevated, largely reflecting supply-side constraints that the Committee expects will subside over time."
• Press conference: Powell won't actively push back against market rate hike pricing given elevated uncertainty about the outlook, particularly re upside inflation risks; will say the FOMC made one decision at this meeting, which was to taper. To reiterate that now is not the time to raise rates.
• Will also be asked re FOMC's latest inflation views; Powell to reiterate baseline that inflation will dissipate as supply chain disruptions ease, but will be elevated for longer than previously expected, and future trajectory highly uncertain with risks skewed to the upside.
• On that note, "Powell to reinforce that they will do what is needed to meet their dual mandate goals, even if it means tightening policy earlier than they currently expect."
• Future action: Liftoff in Dec 2022.