Maintaining Tightening Bias In Forward Guidance (3/3)

On forward guidance... Citi: given the hike, will have to remove the language stating that holding policy rates unchanged allows for additional information to accumulate. In the base case, that language would simply be removed but instead it might be repurposed to dovishly emphasize that moving at a slower pace allows for more information to cumulate.

• MNI's view: Given that the last three meetings saw alterations, it’s tempting to see another tweak in July. But it’s difficult to see how or why the FOMC would adjust this again.
• Some Fed observers suggest it’s possible the language could be tweaked dovishly, reverting to “the extent to which” – re-introducing more conditionality – or adding more “meeting-by-meeting” type language, for instance suggesting that both the extent and timing of further tightening is in question.
• It’s also possible the Fed adds language to suggest it thinks rates are already in sufficiently restrictive territory, or makes reference the need to keep rates in sufficiently restrictive territory for some time once the hikes are concluded. But such changes are only likely to be added only once the Fed is confident it’s done hiking.
• Overall we would expect the substance of this paragraph (see below) to read little changed in July.

Source: June FOMC Statement