Earlier previews can be found here:
- Goldman Sachs are watching the FOMC dot plot for near-term USD direction
- Moody's says the Fed's FOMC will be walking a fine and dangerous line this week (preview)
In addition to the statement the FOMC will
- update a full set of forecasts - including the Summary of Economic Projections and an updated ‘dot plot’ of FOMC members’ expectations for the fed funds target rate
Also in addition to the statement is the press conference from Fed Chair Powell following at 1930 GMT.
Via Scotia, their expectations:
- We expect the Federal Reserve to accelerate the end of its bond purchase program from about mid-2022 to March in what would amount to a very rapid end compared to having purchased US$120 billion of Treasuries and MBS per month as recently as October
- This follows Chair Powell’s remark during CARES Act testimony before Congress on November 30th–December 1st when he said “It is appropriate, I think, for us to discuss at our next meeting, which is in a couple of weeks, whether it will be appropriate to wrap up our purchases a few months earlier.” In central bank speak, that’s about as close to they come in saying they will do something.
- What makes it less than 100% certainty, however, is that he also emphasized the importance of the gap leading up to the coming meeting by noting that “In those two weeks we are going to get more data and learn more about the new variant.” This caution is more likely to be manifest in the form of uncertainty around the discussion on lift-off for the fed funds target rate.
- The median FOMC participant’s forecast for rate hikes is likely to be brought into 2022 but unlikely to risk overshooting market pricing for very mild hikes in 2022. That risk is likely to heat up when the Committee gets closer to lifting off and with further information around delta variant cases and the added effects of the omicron variants.