September 21, 2022 12:58 GMT
The most closely-watched part of the FOMC Statement will be the forward guidance on rates ( which is currently “anticipates that ongoing increases in the target range will be appropriate.”)
- That language will probably remain unchanged again: just as last time, it points to further hikes at the next two meetings at least.
- Alterations to this would probably lean dovish ("may be appropriate;", "some further increases"), but it's doubtful the FOMC would want to provide a signal which could be perceived as a "pivot" - that's what Chair Powell was trying to play down in his Jackson Hole speech a few weeks ago.
- Otherwise, additions to this guidance would probably be lifted from Powell’s JH speech - which while recognizing that the 75bp hike pace will not go on indefinitely, the FOMC intends to keep rates “restrictive” “for some time”.
- So below existing guidance, we could see something like“At some point, as the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases. However, restoring price stability will likely require maintaining a restrictive policy stance for some time.”
- We don’t expect the statement language to change in this regard – these sentiments are more likely to be conveyed in the press conference and the meeting minutes.
Source: MNI Mock Statement, Federal Reserve