FOMC: Expect no significant changes or surprises - Nomura

Analysts at Nomura expect no significant changes or surprises in the FOMC statement on 1 November and suggest that despite the recent and continued weakness in inflation, it is unlikely that the FOMC will announce a material change in its inflation outlook.

Key Quotes

“We think the Committee would prefer to wait for an addition inflation print ahead of the December meeting before changing its inflation assessment. That said, the FOMC might tweak the language on the impact from the recent hurricanes on inflation given the muted impact on non-energy prices in the September CPI report.”

“Elsewhere, in the first paragraph where the Committee discusses the current economic assessment, we expect the statement to acknowledge but look through the decline in nonfarm payrolls caused by the hurricanes and cite the continued downtrend in the unemployment rate. Other than those small tweaks to language, the absence of a press conference next week by the Chair will likely discourage the Committee from making any major shifts in its language.”

“Finally, recent remarks by FOMC participants suggest that they are, for now, inclined to look through the recent weakness. For example, Chair Yellen stated that she thinks soft inflation readings will not persist as labor markets continue to improve. San Francisco Fed President John Williams and New York Fed President William Dudley maintained a relatively hawkish tone that the recent weakness may be transitory. On monetary policy, the FOMC will likely state that the Federal Reserve will continue the balance sheet normalization program, as outlined in Addendum to the Policy Normalization Principles and Plans, published in June 2017.”