FOMC meeting preview: a non-event? - Nomura

Analysts at Nomura's FOMC meeting preview where they do not expect any major policy changes or announcements in tomorrow’s FOMC statement. 

Key Quotes:

"We expect no major policy changes or announcements in tomorrow’s FOMC statement. Chair Yellen’s congressional testimony on 12 July, recent remarks by FOMC participants, and the minutes from the June FOMC meeting all suggest that the Committee will wait to confirm that the economy, including inflation, is on track before raising rates again. Statements from several FOMC participants – Presidents George, Kaplan and Mester – suggest that in the meeting this week they will argue to start the process of balance sheet roll off immediately. However, it seems unlikely that the Committee will take such a decision tomorrow.

First, this is an important change in policy and we think that the Committee would prefer Chair Yellen to explain the decision at a post-meeting press conference. Second, public statements from FOMC participants have not given us the sort of coordinate message that we got before the March FOMC meeting. In that case, a series of public statements from FOMC participants moved market expectations for a rate hike at the March FOMC meeting in a very deliberate, and effective, way. We have had no such communications blitz in the run up to the FOMC meeting tomorrow. We expect the FOMC to announce a decision to start to let the balance sheet roll off after its meeting in September. While we do not expect the FOMC to “pre-announce” such a decision tomorrow, it would not be surprising if the statement included some hint that the Committee expects to take this decision at the September meeting.

We think tomorrow’s statement may provide some additional nuance on how the FOMC sees the recent underperformance of inflation, although we expect the main message that the FOMC expects inflation to move up to its 2% target over the medium term to be reiterated. Other than inflation, we do not expect the statement’s views on the economy or the economic outlook to materially change."