Risk That Statement Eyes Inflation Upside (2/2)

On the same theme, a more hawkish risk is the changing of this phrasing in the penultimate paragraph: "In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals."

• That current phrasing implies risks running in both hawkish and dovish directions.
• But Powell used the following phrasing in his prepared Congressional testimony (bolding ours): "in assessing the appropriate stance of monetary policy, we will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal."
• That would be seen to imply that inflation risks are increasingly skewed to the upside, but also importantly reinforce that the Fed would take action if inflation expectations were to head uncomfortably higher.
• On the dovish side of things, the statement could note downside risks to the economic outlook from the Delta Covid variant. But this is probably captured in the existing language (the Committee takes into account "readings on public health"), and it's unclear that most on the FOMC will see it as a substantial enough risk to single out at this stage. Downside risks are more likely to be noted in Powell's presser - though the word "Delta" didn't appear in his congressional testimony.