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NatWest: "Debatable" Whether FOMC Provides Explicit Liftoff Guidance

FED

NatWest writes that despite no policy action to be taken at the January meeting, market participants will look to any substantive changes to the statement.

  • Statement: Will mostly mark time; could plant a hint about the March policy outlook. “Debatable” whether Fed officials “prep the market” by providing explicit liftoff guidance, “we suspect the FOMC could slip a hawkish hint into the statement that the March meeting is the base case for the start of normalization.”
  • Could include something in line of Oct 2015 “in determining whether it will be appropriate to [hike at the] next meeting”. No specifics on QT plans or dissents.
  • Press conference: Message likely similar to Powell’s renomination hearing: “indicating that the FOMC is anxious to finish QE and begin liftoff on rates (“soon”) before starting to allow balance sheet runoff later this year”. Could remind on timeline for length of QT discussions (2-4 meetings).
  • Future action: Rate liftoff in March, 2 further 2022 hikes (Jun and Dec); QT to start in Sept.
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