The Wall Street Journal's Nick Timiraos has a piece up ahead of Wednesday's Federal Open Market Committee (FOMC) statement, new forecasts, and Federal Reserve Chair Powell's press conference.
Timiraos plays it pretty straight but if I had to read between the lines he is hinting the net of the three events could lean less dovish than market participants are expecting.
On the Statement:
- Officials are likely to maintain language in their policy statement that suggests their next rate change is more likely to be an increase than a cut. Any softening of this so-called tightening bias will be closely watched by financial-market participants because it could be a precursor to a neutral stance in January or March—meaning their next change is as equally likely to be a hike as a cut. And a neutral bias could be a precursor to a rate cut.
On the projections for the economy:
- Officials find themselves in “a weird situation because you don’t want to say ‘We’re not going to cut’ and then end up cutting rates five times next year. But if they say, ‘Four cuts next year,’ then the market might price in six or seven cuts, and they don’t want that,” said Jón Steinsson, an economist at the University of California, Berkeley.
On Powell's Q&A:
- “The market is a little carried away on the possibility of near-term cuts,” said Antulio Bomfim, a former adviser to Powell who is now at Northern Trust Asset Management. “My expectation is that he will gently push against that view.”
The Journal is gated but here is the link if you can access it, its well worth a read.
Policy statement and economic and rate projections are due at at 2 p.m. Eastern time.
Fed Chair Powell’s press conference follows at 2:30 p.m.