Statement: Limited Chance Of Fwd Guidance Changes
With no new Summary of Economic Projections / Dot Plot, and a hold in the Funds rate at 5.25-5.50% fully expected and priced, full attention at 1400ET/1800UK will be on any changes to the FOMC Statement (September's edition is at this link). MNI will release a comparison of the Nov vs Sep Statements shortly after release.
- The main focus is whether the Committee's forward rate guidance changes from: '"In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account..." MNI doesn't expect this to be changed, with analyst expectations for amendments limited to Morgan Stanley (who see the word "additional" removed, implying a softening of guidance).
- The conclusion to Chair Powell’s Oct 19 speech provided a potential template for how this language could shift if and when they begin emphasizing a hold rates in restrictive territory for an extended period: “the Committee is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks.”
- Elsewhere in the statement, expect an adjustment in the characterization of employment ("have slowed in recent months" can be removed in the reference to "job gains"); the description of economic activity as "solid" could possibly be upgraded. Neither would be a market mover. Downgrading the description of inflation "remains elevated" - potentially with a nod to Powell suggesting progress on the dual mandate variables - would be modestly dovish.
- We would not be surprised in the 2nd paragraph to see an acknowledgement of the recent tightening of financial conditions (this would be marginally dovish), and or a mention of Middle East tensions posing risks to the economic/inflation outlook.
- September's Statement is below.
September FOMC StatementSource: Federal Reserve