Sept FOMC Minutes Preview: Watch Neutral Rate And "Soft Landing" Talk (1/2)

The minutes of the FOMC's September meeting will be released at 1400ET/1900UK later Wednesday. A few things to watch:

• The communications from the meeting - which included a higher-than-expected Dot Plot rate profile (see our meeting review here) - appears to have achieved the purpose of convincing markets that participants intended to keep rates "higher for longer", with longer-term yields significantly higher and financial conditions since Sept 20th.
• While the strong market move (10Y yields rose as much as 57bp in the two weeks from just prior to the decision) renders the minutes stale, the risks largely lean to a dovish release vs the meeting. FOMC members have in the past week expressed the opinion that the Fed eyes rising market yields as a reason to think further funds rate hikes may not be required.
• That said, any mention of participants outright discussing conditions for pausing - reaffirming what we interpreted at the meeting as a fairly high bar to a further 25bp raise in 2023 - would be moderately dovish (let alone potential for the next move to be a cut rather than a hike - unlikely a topic of conversation at this stage).
• We'll watch for any indication that the Fed discussed specifics on neutral rates as they relate to policy restrictiveness - Powell at the press conference said "It's certainly plausible" that the neutral rate at this moment is higher than the longer-run rate in the SEP.
• Also of interest will be discussion on how the FOMC threads the needle in explaining its "soft landing" economic projections: while it's not a central projection, how did participants see unchanged inflation over the projection horizon without a pullback in growth and higher inflation? And how likely do they perceive this outcome?