The Federal Reserve will almost surely leave rates unchanged in the current range of 5.25-5.50% at the top of the hour. The intrigue will be in the statement and commentary from Chairman Jerome Powell in the press conference.
Here is how the previous statement read:
Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low. Inflation remains elevated.
The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy. 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 the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.
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. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Adriana D. Kugler; Lorie K. Logan; and Christopher J. Waller
First focus will be on the line about "In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time" and whether it's tweaked to indicate a more hawkish or dovish stance. I don't see a reason to do that at this point but if there's a big market mover it will be that.
Next will be the economic assessment. Describing near-5% growth as 'solid' may be underselling it but even if the Fed acknowledges that, they may hint at a more-subdued outlook to come, balancing it out.
Third will be the line "inflation is elevated". That could be changed or expanded to say something like "inflation remains elevated but there are early signs of softening."
Finally, don't ignore the line "The Committee remains highly attentive to inflation risks" as even by removing the word 'highly' it could indicate a more-neutral stance.
Before the decision, the market is pricing in a 25% chance of a hike at the December 13 meeting. I wouldn't expect that to go to zero in any circumstance but more-dovish language might cut it in half and drag the dollar 30-50 pips lower at the same time.
