What To Expect From Today's FOMC Statement: Nothing, Says Goldman. So - Time To Fade?

Tyler Durden's picture

Sampling several investment banks' opinions on what to expect out of today's FOMC decision in a few hours, one would be left with the impression that absolutely nothing will happen. Not surprisingly, this is what the official party line reps and warrants as well, as telegraphed by that faithful mouthpiece, Jon Hilsenrath. And yet if the Fed has finally understood that its role is only effective if it is surprising, this gives all us all the opportunity to not only doubt what the media and the sellside wants us to expect, but to naturally fade Goldman - one of the best trades in the past three years - who says: "We expect no clarity from Wednesday's FOMC statement and press conference on additional monetary easing. Fed officials will not close the door but are also unlikely to provide a clear hint of further action. Our forecast of additional easing hinges not on what Fed officials say this week, but on our expectation of continued weakness in the economic data." Of course it is possible that the Fed is merely staying true to its recent creed of being honest and transparent and telegraphing policy from miles away. And is thus forced until the market is actually driven by actual macro data instead of who buys how many gizmos using student loans. Or not. Because when in doubt, always ask i) what would Goldman Sachs sell and ii) what would PIMCO buy. The two are rarely both wrong at the same time.

From Goldman Sachs:

Following a two-day meeting on April 24-25, Wednesday's FOMC action will include the same schedule of events as the January 2012 meeting. First, the regular FOMC statement will be published at 12:30pm. Second, materials from the Summary of Economic Projections (SEP) will be released at 2pm. These will comprise of updates of Table 1 showing the range and central tendency--the range excluding the top 3 and bottom 3 entries--of the 17 FOMC meeting participants' macro projections; and of Figure 2 showing the distribution of 17 projections for the federal funds rate by year (through the end of 2014) and first rate hike (through 2016). Finally, Chairman Ben Bernanke will deliver his opening statement for the press conference at 2:15pm, and then take questions from a group of journalists.

Our expectations are as follows:

1. No policy changes and no hints of QE3. We do not expect changes to the main policy parameters. In particular, the committee is very likely to retain its current guidance that economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014,” but it is unlikely to include any comments on possible easing options. We do expect, however, that the FOMC will discuss policy options under alternative scenarios for the economy, including options for additional easing. Chairman Bernanke may be asked this question at the press conference. We expect him to steer a middle ground, leaving open the possibility of additional monetary easing.

2. A slight strengthening of the "significant downside risk" phrase. Given the deterioration in the European sovereign debt crisis over the last month, we expect that the statement will soften or remove the phrase that “strains in global financial markets have eased.” One option would be to go back to the January formulation and simply state that "strains in global financial markets continue to pose significant downside risks to the economic outlook."

3. Nods in the direction of softer data and lower energy prices. Although changes to the description of economic activity will likely be small, we expect the committee to acknowledge the weakening of the dataflow in recent weeks. Instead of saying that "labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated," the committee might say that "labor market conditions have improved further but the unemployment rate remains elevated." To reflect the decline in energy prices in recent weeks, the committee might say that higher energy prices “have boosted” inflation--instead of saying that energy prices "have increased lately"--but then reaffirm that this boost should be temporary.

4. A slight upgrade of the January forecasts. Despite the recent softening of the data, Fed officials are likely to upgrade their economic forecasts (which were made in January). Exhibit 1 below shows our expectation for these changes. First, we expect an unemployment rate midpoint of 8.05% for end- 2012 (down from 8.35% in January), 7.65% for 2013 and 7.05% for 2014 (both down by one tenth). Second, we anticipate an increase in the mid-point for core inflation from 1.65% to 1.75% for end-2012, and a 5 basis point (bp) upgrade to the mid-point in 2013 and 2014.

5. Small hawkish changes to participants' funds rate projections. Some members may lift their funds rate projections--which are shown in Figure 2 of the SEP--in response to their upgrade of inflation and unemployment. Our estimated Taylor rule, however, would suggest that these changes should be relatively small. The bottom of Exhibit 1 shows that we only expect the upper bound of the central tendency to increase by 25bp in 2013 (when it is sufficient for one participant to lift his or her projection) but not in 2014 (when at least three participants would need to raise their projections by 25bp or more). This change might increase the number of participants that are projecting the first rate hike for 2013 from 3 to 4. Also, given the slightly lower profile for the unemployment rate, we think that it is possible that a participant who currently expects the first hike in 2016 might move into the 2015 camp.

Beyond this week, we continue to forecast additional monetary easing at the June FOMC meeting. This prediction does not rest on an expectation of a "dovish signal" this week, but on our expectation that the economic data will continue to disappoint over the next couple of months given higher gasoline prices in the first quarter, the fading short-term inventory cycle boost, and a "payback" for the warm winter. Our confidence in the forecast of additional easing is not particularly high; it is certainly possible that the FOMC will decide yet again to let an asset purchase program lapse without having put a successor program in place. However, this week's FOMC meeting is unlikely to provide a clear signal one way or the other.

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AllThatGlitters's picture

Silver getting punished today.  Looks like it is getting set up for a reversal in oh, let's say about an hour or so!




maxmad's picture

Stock market goes red today!  Plus, the China is completely dumping dollars!  Will trade gold for oil!  Dollar is done!

SheepDog-One's picture

Yea, but then cant we just start smoking the Hopium for next Apple earnings report?

maxmad's picture

When China completely dumps the dollar, an IPAD should be over a million dollars.... bullish right? 

DoChenRollingBearing's picture

SLIGHTEST bit O/T, but I am kind of surprised that the Tylers did not put up something about the nuaseating interview ofcbS economist Steve L with Lloyd Blankfein and other Goldman types during the morning today.  No, I did not hear Sir Lloyd say "God's work", but I did (could not) listen to much.  Even my wife, who does not follow finance, thinks he is sleazy...

SheepDog-One's picture

Little bald headed rat midget is what he is.

Buzzworthy's picture

Short sellers always put downward pressure on either silver and gold or silver or gold on the day of an FOMC statement.  Its like clockwork and is a great mechanism for knowing when you should time your dip buying.

Chaffinch's picture

And of course the May silver options expire today, which often means a bashing for silver, and if the CFTC position limit is really gonna come into effect on May 1st then I guess JPM needs the price as low as possible so they can buy a few shorts back. Can't get my head around exactly what the new regulations mean in terms of contracts...anyone out there know?

EatersOfTheFed's picture

When is the "whole shithouse going to go up in flames"?  Enquiring minds want to know.

maxmad's picture

after June 28th is a good guess...

DoChenRollingBearing's picture

When someone BIG lets something BIG go...

SheepDog-One's picture

'Nothing from the Wizard Ben, so time to fade? 

Oh HELL no! Time to leverage up the fukin rip! Ben the Benevolent willl surely have free QE gifts thats what all the best minds have concluded 100%, although nevermind its been 'coming soon' for well over a year now...just hit the 'That was EASY' button, buy and forget it! 

DeadFred's picture

I love these posts that imply that subtle nuances of what the FOMC says will have any impact on the market. No, the use of a slightly stronger adjective won't do anything because the script for the report is already known and the rip or dive at 2:30 is already programmed into the algos. Short term the market will go where has been told to go. Longer term there is no QE without a dive, and since 'they' want QE it means...

Elk peanus's picture

C, MS, GS, BAC, WF - all down right now

-Elk Peanus

Ivanovich's picture

Lower energy prices?  On which planet did this occur again?

SheepDog-One's picture

LOL, oil 'dropped' .50 cents so we now have 'lower energy prices' nevermind of course gas is well over $4 avg nationwide. 

Ivanovich's picture

Well, it's not over $4 avg nationally, yet.  But it's damned close.  $3.85 I think...

SheepDog-One's picture

Well last data I saw had it over $4, and its definitely over $4 here anyway and its historically one of the cheaper gas areas....I dont know what price statistic manipulation theyre putting out at the moment but I know gas it at historical highs!

Deep79's picture

ZH has been saying QE3 now since last June, and here we are at close to 1400 sp and people actually think we gonna get QE3.

Serioulsy people think, you dont think the FED knows it doesn't work for more than about 3-6 months. We need to get to about 1100-1200 to even consdier QE.



SheepDog-One's picture

It is HILLARIOUS! Theyve been 'hinting at, promising, nudge nudge wink wink 'QE' any minute now' for well over a year, 'its gotta be comin any minute people, no really, huge free gifts....you'll see!''.....yea whatever theyre NEVER going to do QE because they can not let the markets drop even .5% without an immediate reversal within 12 hours. So the markets will never plunge 15% to 'pave the way' for QE....just none of this shit is EVER going to happen! I wonder when the first player realizes it and tips the first domino.

Christoph830's picture

I'm sorry but I've seen this argument many times on this site and I just don't get the logic.  Why can't QE3 be instituted with the S&P at 1400?  In Bernanke's twisted mind, he may actually think 1400 is undervalued and wants to continue to juice the markets with further QE.

SheepDog-One's picture

'Juice the markets'...lol for what, just for fun? No ones buying it except him! What youre really saying is they can keep circle jerking themselves longer...hey whatever.

Let him try it and the country can enjoy looking back at $4 gas as 'cheap'....hey go for it.

WAMO556's picture

Sheepdog-One: Spot on. Recently saw a article on AP and again on Yahoo in regards to 4.00 dollar gas - WAS CHEAP and that the American Economy could handle it. So why not give the market a juice of fake money to keep it going higher and to get the president re-elected. Mittens position is platform is on how Obama has handled the economy. The Juicing will only last for 5-6 months, but that is exactly what is needed, with another short juicing in october for the OCTOBER SUPRISE. Just saying.

SheepDog-One's picture

The funny part is no one cares about stocks anymore, I do an experiment lately and ask co-workers where the stock markets are. Most of them have no clue at all and cant get within 1,000 points where the DOW actually is. Will broke people really be impressed if the DOW is at 14,000? Or just a bit more pissed off? About the most UNpopular thing with the american people is this QE bullshit, people know its just to enrich billionaires and they know it doesnt help them. 

DoChenRollingBearing's picture

+ 1

Now THAT is a great little data point.  Even fairly well educated have no CLUE as to what's going on, and yet they are so OUT of the market, that they do not know or even care.  A Lost Generation of investors.

Bravo SheepDog!

Deep79's picture

Think where oil and commodities would head?



SheepDog-One's picture

Thats why theyre obviously stuck, SURE they could dump in more fake money, but then its not exactly 2008 anymore and commodities are pushing near all time highs, do it again and sure theyll have their BS equities higher, and also gas at $5 or $6. 

buzzsaw99's picture

fed statement: We got to move these icrAAPL gadgets. Money for nothin', chicks for free.


Cognitive Dissonance's picture

This all sounds as convolted as double secret probation.


bnbdnb's picture

Does GS usually provide good information on Fed decisions? Serious question.

xela2200's picture

Well based on past experience, whatever they say, it is the opposite. Actually, I am wondering if there isn't something in the works just because GS hasn't been saying that QE is coming like in every previous FMOC meeting. All of the sudden, they are telling us to expect nothing.

bnbdnb's picture

Makes me wonder if the Fed will do what NO ONE expects...raise interest rates.

xela2200's picture

They cannot raise rates. They are locked in. If they do, the US Government goes bust.

DeadFred's picture

GS knows what the Fed will do because they call the shots, or at least are so tight in the loop that it makes no difference. The only question you have to ask each time is whether telling the truth serves their interests, sometimes yes, sometimes no.

I don't think it's possible to keep the markets happy through the elections.

Do they tank it now then recover and the Kenyan version of Obamney gets elected?

Do they rally now and tank it in late summer so the hedge fund version of Obamney get elected?

Take your pick but I'm going with the tank it early version.

DoChenRollingBearing's picture

+ 1

Some really great comments on this thread.  Which of Obamney do TPTB want?  Or how split are the factions (my way of looking at the TPTB)?

Your guess would be better than mine.  

I'll just keep putting more, bit-by-bit, into Au.  No trust.

MFL8240's picture

The liars will soon tell us they are not printing money when in fact they are buying 75% of all US traesuries and the Wall Street and Chicago gangsters will continue the con game with lower Gold and Silver, higher stoccks amid no recovery.  The whole sytem is a fucking joke of lies, deception, fraud and propoganda!

tocointhephrase's picture

They fucked it big time. No one trusts this system anymore. Good luck governments and bankers, your days are truly numbered!

ArkansasAngie's picture

What the fed does incrementally ...one word ... one phrase ... is not relevant to my personally investing

I send as little as possible to Washington and none to wall street

My rubber hits the road bird's eye view says that until we have price discovery nothing will change

SheepDog-One's picture

They've gotten here, and really have no clue what to do next, I guarantee it. Theres no 'masterplan' at work here, just a bunch of patchwork cut and walpaper over everything....delay and pray.... its now just do whatever it takes to get thru today to live another day.

Jason T's picture

Long growing own food, using sun for energy and heat and going long them $50 light bulbs that will last 30 years and use only 10 watts of electricity per hour.  Bitchez!

bnbdnb's picture

IMO, the fed should increase rates, or advise they anticipate raising interest rates by the end of the year. Want to jump start this economy? Get gas near $2.50/gallon, with a stronger dollar. Easing and/or extended lower rates isn't buying anything anymore, if it ever did.

SheepDog-One's picture

Well they dont want to 'get the economy going again'...any fool can see it was PURPOSELY destroyed thru fake market collapses and printing money and monetizing the debt outright. Any freshman econ101 student should be able to identify that easily!

bnbdnb's picture

Not so sure, a stronger dollar for 6 months, could get Obama re-elected, and ensure Ben keeps his job.

SheepDog-One's picture

You assume the banksters want to KEEP the puppet Obama....I do not...I believe they want 'whitey republican' puppet in there to take all the heat for the collapse!

'Stronger dollar' lol relative to what? Its worthless shitpaper.

bnbdnb's picture

If they didn't want him, they wouldn't be funding his re-election campaign 3 to 1 over Romney.

SheepDog-One's picture

'They' who? Obama is having a contribution drought. Besides money means nothing, theyve already set who will 'win'. It makes me chuckle to see people actually think 'the people' go out there and decide who the so-called 'president' will be, really the CEO of the bankrupt banker corporation. The people decide nothing....grand illusion.

DoChenRollingBearing's picture

^--- DIALOGUE above.  + 1 to all.

Council of Economic Terrorists's picture

"It makes me chuckle to see people actually think 'the people' go out there and decide who the so-called 'president' will be"


Yep.  Obama and Bush family share common ancestor, Thomas Hinckley.  About all this talk of Obama being Kenyan, if that is so, he didn't come over here on a SLAVE SHIP.  He came here in a jet because he is royalty.