Potential July Statement Changes Mostly Lean Hawkish (1/2)

The July FOMC statement could see a couple of subtle but important changes from June's as the Fed edges further toward tapering, and most of them would be hawkish-leaning. While our central expectation is that the statement will mostly be unchanged, apart from perhaps some of the usual marking-to-market, we'll be looking for changes in the following areas in our Instant Answers (we'll post these shortly).

• The first regards the inflation language in the 2^nd paragraph. Powell said the following in the prepared text for his mid-July congressional testimony: "Inflation has increased notably and will likely remain elevated in coming months before moderating." Language to this effect could replace the June meeting statement's "Inflation has risen, largely reflecting transitory factors."
• This change of phrase is relatively neutral, and still points to the Fed's expectation that the current inflation surge will be "transitory", but would better reflect the current reality of some of the highest inflation prints in the past 4 decades.
• Another potential hawkish change could come via the phrasing of the pledge to maintain asset purchases "until substantial further progress has been made toward the Committee's maximum employment and price stability goals". This could be reworded to reflect some members' views that the Committee has already met the price stability threshold to taper, but more is required on the jobs front.