June Statement: Skip Won't Change Tightening Bias (1/2)

Assuming the FOMC opts for a “skip” in June with an eye to giving serious consideration to a hike in July, it’s unlikely that the June Statement will change much from the previous edition in May (Link to May FOMC statement).

• In particular, the forward guidance will be eyed, but it’s unlikely we see much change there as the existing language encompasses a hiking bias. Going paragraph by paragraph through the May statement in italics, with some potential changes underlined:

"Economic activity expanded at a modest pace in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated. The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks."

• No substantial changes to the description of economic dynamics are likely, though as usual for the June statement the timeframe will be changed to reflect that the 1^st quarter GDP data are in: “Economic activity appears to have remained steady after expanding at a modest pace in the first quarter.”
• Nor would we expect any changes to the paragraph introduced in March’s meeting amid banking turmoil, as it captures the FOMC’s expectation of tighter banking conditions – though with a highly uncertain magnitude.