Analysts at Nomura expect few new developments out of the 1-2 May FOMC meeting, but given 12-month change of PCE price index is likely to jump close to 2% in March, they expect the FOMC to acknowledge that inflation is now close to its 2% goal in the first paragraph of its post-meeting statement.

Key Quotes

“Also, in the second paragraph devoted to its outlook, the Committee will likely drop the language on its expectation of inflation moving up “in coming months.” However, it will likely retain the latter part of the same sentence that says, “[Inflation on a 12-month basis is expected] to stabilize around the Committee’s 2 percent objective over the medium term.” Moreover, it is possible that the Committee will highlight its expectation, as expressed in its latest forecasts, that inflation will move above its 2% target, although we do not think this is likely.”

“Elsewhere in the statement, we think the FOMC will acknowledge somewhat softer-thanexpected economic activity thus far in 2018. However, we expect the FOMC to signal that it believes that the recent slowdown will prove transitory. In a speech on 18 April, New York Fed President Dudley noted that he views the slowdown as “mostly due to two transitory factors: a retrenchment following the spurt in activity from recovery efforts following Hurricanes Harvey, Irma, and Maria, and the delay in this year’s tax refund payments to those receiving certain tax credits.”

“For the May meeting, we believe the minutes (scheduled for release on 23 May) will rightly deserve more attention given the Committee’s expected discussions on trade, fiscal policy, inflation and financial conditions. Consistent with incoming regional business surveys, the Beige Book, prepared for the May FOMC meeting, reflected concerns over US trade policies among business contacts. The minutes may include discussions on the short-term impact of deterioration in business sentiment in response to developments in trade policies.”

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