In Deutsche Bank's preview of today Federal Open Market Committee (FOMC) meeting analysts at the bank say they are expecting "only minor revisions to the meeting statement that saw an overhaul last meeting."
With regards to the SEP, the growth and unemployment forecasts are unlikely to change but the 2024 inflation forecasts potentially could.
- We expect the Fed to revise up their 2024 core PCE inflation forecast by a tenth to 2.5%, although they see meaningful risks that it gets revised up even higher to 2.6%.
- A 2.5% core PCE reading would allow just enough wiggle room to keep the 2024 fed funds rate at 4.6% (75 bps of cuts).
- However, if core PCE inflation were revised up to 2.6%, it would likely entail the Fed moving their base case back to 50 bps of cuts, as this would essentially reflect the same forecasts as the September 2023 SEP.
TD are wary of a fall for the US dollar:
- We also look for the Fed to maintain its median projection for three cuts this year and for the release of preliminary details about QT plans.
- Risk-reward under our baseline of the Fed's 2024 dot remaining unchanged in a market that is net long the dollar is for USD weakness.
More preview here:
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FOMC statement is due at 2pm US Eastern time, which is 1800 GMT. Powell's press conference follows a half hour later.
