JPMorgan: Statement To Signal March Hike

JPMorgan expects the Fed to signal a high likelihood of a March rate hike in the January statement.

• While there is a risk (“perhaps one-in-four”) that the FOMC decides to end purchases in mid-Feb, “the odds of a surprise rate hike … look much smaller, in our view.”
• Statement: “Will add that maximum employment condition is close to being met and that the Committee anticipates that it will soon be appropriate to adjust the stance of policy.”
• Don’t expect guidance on the pace of tightening after liftoff. This might be seen by some as opening the door to a 50bp March hike, “but we think the more likely use of this flexibility is the option to hike at every meeting, if the need arises.”
• Statement outlook could reflect “hiccup in activity around the turn of the year”, offset by “progress on vaccinations and an easing of supply constraints” supporting growth.
• Press conference: If the FOMC agrees on a runoff plan at this meeting, would expect this to be communicated in Powell’s opening remarks, not the statement.