Last 5 FOMCs Have Seen Hawkish Initial Reac, But Dovish Follow-Through

MNI's expectations of today's FOMC statement is that meaningful changes to the statement would be much more likely to be dovish rather than hawkish. But a basically unchanged statement (especially on forward guidance) is our base case, and if there are any changes, they are likely to be minimal. (Our preview goes into more depth.)

• Even if a more dovish tilt is agreed at the meeting, the Committee may prefer to communicate them in the Powell press conference and the minutes, as per their approach the last few meetings.
• Keep in mind that the last 5 FOMCs - each of which have brought a rate hike - have seen a hawkish market reaction (rates sell off, dollar rises, equities drop) between the Statement release and Powell's press conference; by the time Powell is into the Q&A though, those moves had begun to reverse. The chart attached shows those moves for the past 2 FOMCs.
• While past performance is not an indication of future results, following the recent pattern it's possible that there would be a modest initial hawkish reaction to no change in today's statement (perhaps some disappointment from a lack of dovish hints?), followed by Powell reinforcing speculation that the Committee is thinking about stepping down to 50bp hikes December, with the decision to be data-dependent.

Intraday 4th Eurodollar Future, Jul (Top) and Sep (Bot) FOMC Intraday. UK Time ZoneSource: BBG, MNI