Morgan Stanley's assessment of the June FOMC:...>

FED: Morgan Stanley's assessment of the June FOMC: "Don't Even Think About It":

- Key takeaway is strong verbal forward guidance, in addition to implicit

guidance from the dot plot and the SEP. There is almost no catalyst on the

projection horizon that would push policymakers toward thinking about hikes.

- The spread between the highest v lowest GDP growth projections 2020/21/22 was

the highest it's been since the Fed began publishing the SEP. With inflation

undershoots in SEP, unlikely that the dot plot will show hikes for a

considerable period of time.

- YCC an "open question"; though strong fwd guidance supplants the need for YCC.

- In Sep., expect state-based fwd guidance with the outlook for the policy rate

directly linked to labor market and inflation outcomes-i.e., zero rates until

the unemp rate reaches desired level (likely around 4.5%) and until inflation

evolves in a way that is convincingly consistent with symmetric 2% inflation

goal (likely specified as averaging around a 2% pace for around 12-18 months).

- Balance sheet policies are likely to remain steady for now, especially as FOMC

appears content with the current state of financial conditions.