Why this Fed meeting won’t be a non-event - ING

"Downgrades to the infamous dot diagram could complicate Yellen's efforts to convince markets they are too complacent," argues James Knightley, Chief International Economist at ING.

Key quotes: 

"This week's FOMC meeting may not be the non-event that many in the market are seemingly viewing it. While the long-awaited announcement of the Fed's balance sheet unwind will be the main event, there will be keen interest in the new official forecasts. These may be used to reinforce the message that, while there is little need for aggressive interest rate hikes, the market remains too complacent on the prospect of higher interest rates."

"Don't rule out a dots downgrade: With just one hike priced in by the end of 2018, the market's view on interest rates is still worlds apart from the Fed's June projections, which pencilled in 100bp of rate hikes over the next 18 months."

"Some market scepticism is understandable. The Fed has signalled higher interest rates on numerous occasions over the past couple of years, only to then subsequently not follow through with them. But also with several measures of inflation well below 2%, there is a sense that there is little need for tighter policy." 

"This latter point, in particular, may see some officials becoming less aggressive on their expectations for the path of interest rates. As such, we would not be surprised to see the dot diagram move closer to our forecast of three rate hikes rather than the four previously indicated."