Morgan Stanley: The Statement Gets Wordy

Morgan Stanley sees a "substantial rewrite of the statement" out of this week's FOMC meeting, with "the largest number of changes, at least by word count, that we have seen in some time", and inflation risks getting more attention.

• Statement: The statement will get an "overhaul". Will likely lay out the taper schedule and stress that it is flexible, with more details in a concurrent operating policy note.
• While characterization of inflation as "transitory" will remain, new language will "underscore that ongoing supply constraints and shortages remain, and may keep inflation elevated well into next year", and that they will monitor incoming data "carefully", a word the FOMC does "not use lightly".
• Press conference: Powell "could remind the public that the Committee could ramp up the pace of taper should the data come in better than expected, or reduce the pace of, or stop the taper should the data come in worse than expected."
• Powell to "underscore that the FOMC remains far from fully meeting its goals as a soft way of pushing back on the expectation rate increases could start alongside the end of tapering."