FOMC Preview: What 8 major banks are expecting from January meeting?

Global markets are keenly awaiting the outcome of an all-important FOMC’s January meeting, and as we head towards the decision timings, here are the expectations as forecasted by the economists and researchers of 8 major banks.

The consensus amongst most economists and analysts suggest, that the Fed will stay on the side-lines this time, but will likely keep all options open.

ABN AMRO

“The FOMC is widely expected to keep policy on hold this Wednesday. Given the significant shift in communication from Fed officials in recent weeks, the focus will be on any further tweaks to the statement, and on Chair Powell’s first press conference of 2019.”

“We expect minimal changes to the statement at this stage, given that the market has already moved significantly to price almost no tightening for the coming year. While we believe the Fed is done with rate hikes, we think the tightening bias will remain in the statement language (i.e. that the Fed expects ‘some further gradual increases’ in rates).”

“We expect Chair Powell to sound cautious over the outlook at the press conference given the global slowdown, and domestic risks such as potentially further government shutdowns, and tightening financial conditions. He will likely continue to emphasise the data dependence of the Fed’s moves going forward, and signal that further tightening is not imminent.”

Westpac

“The Federal Reserve’s first meeting of 2019 will be the key focus for global markets. Chair Powell will conduct a press conference and he will be quizzed on the souring global outlook with trade and government shutdown adding to the uncertainty.”

“Fed officials have struck a consistently cautious tone since their December hike amid growing calls for a pause as the Fed officials contrast a strong US economy with market volatility and global uncertainty.”

“The other topic for consideration will be the Fed’s balance sheet management. While it hasn’t been as widely discussed, media speculation suggest the balance sheet reduction may be ‘reduced’ with the balance sheet set to reach a larger terminal level than originally predicted.”

NBF

“Keeping in accordance with its most recent communications, which emphasized the central bank’s wait-and-see approach, the Fed will stay on the side-lines this time. It will still be interesting to hear Jerome Powell's comments as he gives his first press conference of the year.”

TDS

“The FOMC is likely to stress patience and data dependence in part by removing the last vestiges of forward guidance in its statement. Risks should remain "roughly balanced."

“Market anticipation for a substantive announcement on ending balance sheet runoff is likely misplaced, but we could see Powell hint at the possibility of a larger balance sheet than in past comments.”

Standard Chartered

“Fed officials have emphasised patience in recent months, and expectations of a March hike are now low among investors and forecasters. We do not expect substantive changes to this outlook after the January meeting.”

“We expect the Fed’s ‘data dependence’ to come down to momentum in business investment on the one hand and employment on the other. We believe financial conditions and global growth concerns will continue to play a role via their impact on investment and employment.”

Nordea Markets

“Most FOMC members have been on the wires promising patience and data dependence since the December meeting. At the press conference following this week’s meeting, Fed Chair Powell will explain what that means and how close the Fed is to the end.”

“All eight meetings in 2019 are followed by a press conference and should be considered “live”. The Fed will keep rates on hold at Wednesday's meeting and focus all attention on communicating patience and data dependence in the statement and at the press conference.”

“Markets will be listening carefully when it comes to the pace of balance-sheet reductions, currently at a maximum of 50bn per month.”

“At this week’s meeting the Fed Chair is likely to stay his course, but keep all options open.”

ING

“The Federal Reserve is widely expected to sit on its hands with a no policy change announcement on 30 January. The fact that the government shutdown has limited the data flow also argues for a pause, until there is more clarity.”

“The Federal Reserve only raised rates last month, we continue to expect just two rate rises in 2019 versus the four we saw in 2018. Financial markets are pricing the risk of rate cuts, but we think the strength of the jobs market makes this unlikely.”

Rabobank

“It seems far less likely that we will see any major developments from this Fed meeting, coming so soon after its latest towel-throwing-in exercise. But let’s see if there are any wrinkles over the difference between a pause in raising rates and a halt to raising rates, especially when an ex-Fed member is talking about cutting rates!”