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FED

One of the out-of-consensus possibilities for today's Fed decision is for the FOMC to release a policy normalization document explaining its general framework for winding down the balance sheet. (Nomura sees it being released today, UBS says it's a close call.)

  • A "Policy Normalization Principles and Plans" (issued in 2014 with an addendum in 2017 to explain that cycle's balance sheet policy) release today may not necessarily contain granular detail on the pace / composition of runoff, but would at least formalize the FOMC's previous communications/Dec minutes that the pace of runoff will likely be "sooner and faster" as Powell put it.
  • Such a document is expected at some point this year ahead of QT start. But if it's out today, it would be a hawkish development as the FOMC's plans would be better-developed than previously expected.
  • Either way there are expected to be headlines today referring to another document, the “Statement of Longer-Run Goals and Monetary Policy Strategy” document - this is expected to be released alongside the monetary policy Statement, following the annual organizational meeting this week. This is expected to be reaffirmed with no substantive changes. The link for the January 2021 version is available here.
MNI London Bureau | +44 203-865-3807 | tim.cooper@marketnews.com
MNI London Bureau | +44 203-865-3807 | tim.cooper@marketnews.com

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