Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI Fed Preview - June 2021
- The FOMC is likely to begin "talking about talking" about tapering at its June meeting.
- But Chair Powell will make clear that the FOMC is not yet ready to move any further than that on reducing asset purchases, with the recent jump in inflation being only "transitory", and weaker-than-expected job growth leaving the Fed far away from achieving its "substantial further progress" criteria.
- The 2023 Fed funds rate dots in the SEP are likely to show further support for a hike, with a good chance the median rises. The outlook for "transitory" inflation will also be eyed in the projections.
- The Fed is likely to hold off on tweaking the IOER and ON RRP rates (though prevailing analyst consensus is that this is a very close call).
Market-Implied Rate Outlook
Fed liftoff expectations have moderated since the April FOMC: we now estimate the first hike is only fully priced by March 2023, whereas in late April it was seen no later than the Dec 2022 meeting. Roughly one full 25bp hike has been brought out of the rate path to Dec 2025 (by which point around 6.5 cumulative hikes are seen, vs 7.5 just after the Apr FOMC).
Sell-Side Expectations
While no analysts whose previews MNI read expect any substantial change in policy at the June FOMC, most expect that participants will initiate early discussions on tapering, but falling well short of signalling any imminent action. Whether that's communicated at the press conference or in the meeting minutes is a matter of some debate.
- Based on sell-side analysts' previews, the June FOMC Dot Plot is expected to show a median hike to be introduced in 2023 (vs no change in the March projections), though opinion is split: some see no change; see the median shifting to 0.25% (2 dots move up), some see 0.375%, and one) sees a 50bps rise to the median as possible.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.