As the FOMC meeting statement today will be accompanied by the Summary of Economic Projections, Citi anticipates that the Fed should move more dovishly in adjusting its dot plots and inflation forecasts lower today. As for the statement itself, they see a change in this particular passage. In October:
"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."
They see that being changed to:
"In determining the extent to which 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."
It's a subtle shift but one that puts a doorstop to rate hikes as the Fed looks to shift towards easing policy next year. Citi then says that Powell's press conference is "unlikely to strongly push back against market pricing including almost a full cut priced by March".
As for their overall outlook, they see the first rate cut by the Fed in July 2024 with a total of 100 bps worth of rate cuts for next year.
