FOMC: No change in policy is expected – Deutsche Bank

Analysts at Deutsche Bank suggest that today’s highlight is likely to be the conclusion of the FOMC as it’s probably a little hard to get too excited though given that it’s a non-press conference meeting and no change in policy is expected with the market pricing a lowly 4% probability to a hike.

Key Quotes

“Indeed our US economists believe that the focus will instead be on modifications to the statement language. Specifically they will be looking for indications that the Committee is preparing for more substantial changes to come in June. The team expect the statement to find a way of acknowledging but downplaying the softening of growth in Q1, perhaps by noting that it followed a strong Q4 bounce back from hurricane disrupted activity earlier.”

“More importantly, our colleagues expect the Committee to upgrade the inflation language to note that inflation has risen and is near their 2% objective. They could also note that market-based measures of inflation compensation have risen further in recent months. On the outlook they could make a subtle change to describing it as “remains solid” rather than “has strengthened” recently. The other two issues that will likely be discussed are when to modify either (1) the balance of risks or (2) the statement that the federal funds rate is likely “to remain, for some time, below levels that are expected to prevail in the longer run”.”