December FOMC Preview: The inflection begins - TDS

Analysts at TD Securities suggest that changes to the FOMC statement language should remove the last vestiges of forward guidance, making policy even more data dependent and hinting that policy may be approaching the end of the cycle.

Key Quotes

“In his press conference we expect Chair Powell to continue to sound cautiously optimistic on the outlook and to try to calm market concerns about over-tightening.”

“We think a decline in the 2019 median dot to two hikes from three is slightly more likely than staying put. Conversely, we expect the median longer-run dot to remain at 3%. The overall tone of the meeting should be modestly dovish.”

“With the Fed expected to confirm some of the dovish pricing in rates, we think as confirmation in the dot-plot would be a catalyst to trigger a USD realignment, particularly if this is also met with a US-led equity drawdown.”