What do Major Banks expect from January FOMC meeting?


Today, Fed policymakers will publish the FOMC policy statement at 19 00 GMT. What do Major Banks expect from January FOMC meeting?

1 February, AtoZForex Today, at 19 00 GMT, we will hear the US Federal Open Markets Committee (FOMC) policy statement. The meeting started yesterday, and markets are anxiously waiting for the announcement.

What do Major Banks expect from January FOMC meeting?

Since this FOMC meeting is the first after Donald Trump took over the White House, markets are being cautious. Some expect Fed policymakers to deliver bland statement due to the lack of details of Trump policies. Let’s look at what do Major Banks expect from the upcoming meeting.

Goldman Sachs: No major changes in FOMC statement

According to experts at Goldman Sachs, the Fed policymakers will most likely keep the policy stable on Wednesday. Moreover, only slight revisions to the post-gathering statement are expected.

The bank is seeing the positive comments on the economic activity. In addition, Goldman experts expect a potential shift to say headline PCE inflation will hit 2% “relatively soon.” In addition, the bank sees the FOMC members to leave the balance of risk assessment and the characterization of current policy stable.

BofA Merill Lynch: Slight changes in FOMC language

The Bank of America expects no major changes from the upcoming FOMC meeting today. The Fed policymakers will be releasing the statement after the meeting. No press conference will take place this time. The experts from BofA do not expect policy changes, where the FOMC will keep the rates at the range of 50-75 bp. The reinvestment policy will be kept as well, according to BofA.

However, the bank sees shifts in FOMC language. To be more specific, the experts see the Fed stressing the decrease in labor market slack. Moreover, the possible note that confidence measures have advanced is expected. In the bank’s view, the changes would be seen as slightly more hawkish. The overall market consensus stands at two rate hikes this year, and another two during 2018. Following on this, the BofA analysts agree with markets in regards to the rate hike pace. Yet, the bank believes the risk for a faster pace will commence next year.

As per the expectations for the effects on the Forex market side, BofA sees a possible slowdown for the USD. The expected minor changes in FOMC language could provide a bit more optimistic tone. Consequently, this would put forward some upside risks to FOMC pricing, according to the experts. Whereas Forex movements are most likely to be weak, a more confident tone could suggest some reprieve to the US dollar, as traders attention turns to a balance of policy risks. The bank sees the risks bent toward faster interest rates hikes on growth-optimistic easing.

In addition, BofA expects Donald Trump’s fiscal and tax agenda to back the USD, even though the US administration tends to talk it down.

Nomura: Minor changes to the description of labor market

The Japanese financial holding company expects the Fed policymakers to keep the interest rates at the range of 0.50-0.75% on Wednesday. Moreover, the economic activity data and inflation figures are in line with expectations since the last meeting of Fed, according to Nomura analysts. Also, they anticipate minor change to the FOMC statement. These include:

– The paragraph on the economic conditions should be updated in line with the latest developments. However, Nomura group anticipates that the general essence of the paragraph won’t be changed. The job market in the US has remained strong, with economic activity advancing at a modest pace.

– For the second paragraph, the analysts from Nomura expect slight changes. The latest inflation data proposes that the inflation is on the steady rise to reach the 2% target. The bank sees the risk statement from FOMC to remain the same: “Near-term risks to the economic outlook appear roughly balanced.”

– The changes are seen by the expert in the description of the US job market. They highlight the speech of Janet Yellen from the 19th January, where she noted that the US economy is close to the full employment. Therefore, Nomura expects the possible change in the FOMC language on the outlook for the labor market.

Credit Agricole: Focus on Friday NFP

The Paris-headquartered financial company expects the FOMC to take a “minimalist” approach on Wednesday. According to the opinion of analysts, the Fed policymakers will keep the rates steady, with few minor changes to the policy statement.

Credit Agricole stresses that Fed Chairwoman Janet Yellen has argued there are few signals that the job markets is overheated. This implies that Fed will not rush to hike the rates, according to the experts. French financial player stated that the Fed will wait for more data before taking the decision on rates.

Also, they see that the NFP report on Friday will play a bigger role for markets, rather than today’s statement. The analysts see the NFP report emerging at 175K, with an average hourly earnings growth of 2.7% year-on-year in December.

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