JPMorgan: Inflation Language Could Be Tweaked

JPMorgan sees a taper announcement at this week's FOMC as "all but pre-announced", with greater interest in the statement's language on inflation.

• Statement: Could adjust language describing high inflation as "largely reflecting transitory factors." "A simple edit would be to replace 'largely' with 'partly.' A richer revision would be to return to the format of past statements, and comment on drivers of inflation such resource utilization, inflation expectations, etc."
• Will need to note that economic growth has moderated; description of labor market relatively upbeat despite Aug-Sep slowing in job growth. Probably too soon to drop reference to remaining risks.
• The preamble to fwd guidance "with inflation having run persistently below [2%]" "is looking a little shopworn and could be ripe for deletion."
• JPM sees the taper as put on "auto-pilot", "albeit with some sort of knock-out clause like 'so long as economic activity and inflation evolve broadly in line with the Committee's outlook'.
• Press conference: Powell to have the chance to clarify aspects of the taper process, particularly that it's not entirely on a preset course, and that contraction in the balance sheet won't occur until well after liftoff.