FOMC preview: Why this is one for the headline traders
Today's is the big debut for new Fed Chairman Kevin Warsh, as he wraps up a two-day meeting with the FOMC.
The result is a foregone conclusion -- rates will stay in the 3.50-3.75% range. What's less certain is how the statement will read. In the last meeting, three voting members dissented regarding the language in the statement that suggested an easing bias, which is a reference to the "additional adjustments to the target range for the federal funds rate" line.
What I suspect is that Warsh will tear up the old statement completely in order to try to disassociate from that sticking point without introducing a new bias. The risk in that is the statement will read neutral, which the market might see as a hawkish shift.
That will set the stage for Warsh's first press conference and that will be the real test. Warsh will repeatedly be asked about inflation and about his prior dovish stance. I think that's going to be a minefield unless he plays it very safe and says as little as possible.
But there is a risk in that too, if Warsh doesn't sound like the same dove who Trump nominated, then the market could read into that as well.
At the moment, the market is pricing in 21 bps of easing this year and a full rate hike by January 2027.
For this press conference, I could see it going either way:
1) Warsh makes a hawkish pivot
This could partly reflect +4% inflation and the risks around it, and partly that the Chair has to speak for the FOMC. In order to do this, he doesn't need to talk about hiking rates or even say that rate hikes could be necessary. Not being dovish could be good enough or even just recommitting to the Fed's mandate.
2) Warsh remains the dove he was in confirmation
I see this as a bigger risk because it would cause a repricing in rate hikes. He could make a powerful argument for cutting rates and the past week of oil price declines has given him some ammunition. I have a hard time seeing this as the view of the FOMC, particularly in light of recent strong employment data, but it's certainly a risk, and would be materially dollar negative.
In short, he has to walk a tightrope here and I think the trade will be on any short-term missteps. It's best to track down as low-latency feed as possible and go with the headlines.
This article was written by Adam Button at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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