This Is What The Fed Will Most Likely Say Today

While we previously did a full preview of the key issues to be covered in today's FOMC meeting, which include changes to the dot plot (1 net dot increase will push the number of rate hikes in 2018 from 3 to 4) as well as the Fed's 2019 rate trajectory outlook, the change to the IOER rate, the discussion of the Neutral Rate, flipping to an "every meeting is live" mode, and how the Fed plans to deal with a generally overheating economy, the biggest interest - at least until Powell sits down at 2:30pm - is what the Fed statement will say.

To recap, with a number of Fed officials, notably Williams (voter) and Brainard (voter), arguing that forward guidance may need to be changed as the neutral rate approaches, the FOMC will likely review its language around ‘accommodative policy’. The line in the statement in focus will be that rates will remain “for some time, below the levels that are expected to prevail in the longer run.” It is therefore likely that this phrase will be taken out entirely.

Elsewhere, most Fed watchers expect the statement to retain an upbeat tone, with a constructive view on household spending, an acknowledgement of lower unemployment, and a hawkish rewording of the forward guidance. On the negative side, Goldman believes that with Italian sovereign spreads returning to levels last seen in the European debt crisis, the statement may include a subtle reference to heightened uncertainty abroad, echoing recent comments from Governor Brainard.

In terms of other key changes, look for the following:

  • In response to upward pressure on the effective fed funds rate, n we expect a policy directive in the statement’s implementation note that will adjust the interest on excess reserves rate (IOER). Such a change (for example, “to a level 5 basis points below the top of the target range”) was strongly suggested by the May minutes.
  • We do not expect a direct reference to recently enacted tariffs nor to the prospect of additional trade restrictions. We do, however, expect these issues to come up during the press conference.
  • We think Fed governor nominees Richard Clarida and Michelle Bowman will not attend next week’s meeting. Given that the Senate Financial Services Committee vote is currently scheduled for Tuesday the 12th, the odds of scheduling and holding a floor vote to confirm them in time for the meeting are very low.
  • We do not expect any dissents, matching the unanimity of the March tightening action. The December dissenters (Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans) are non-voters this year, and we expect that even the more dovish voters on the Committee will be persuaded to support a second hike in 2018

Putting it all together, here is the Goldman proposed redline of what the June (vs May) statement will look like:

Finally, in an interesting, if completely meeaningless exercise, Goldman conducted "probit regressions to quantify and analyze the growth and inflation assessments of the FOMC statements of the past decade."

Focusing on the FOMC statements since 2007—an inflection point in the era of enhanced central bank communication—Goldman classified the growth and inflation language of each statement into six ordinal groupings, following a similar approach used in past research to analyze inflation pressures in the Beige Book. For example, the FOMC statement’s characterization of job growth during this period has run the gamut from “strong” and “solid” to “softened” and even “declined steeply.” This is charted below:


What does this mean for the June FOMC statement? As shown in the chart below, Goldman expects an upgrade to consumer spending (to “picked up in recent months”) and an adjustment to the job growth language (to “solid” from “strong on average”), but no changes to business investment or overall activity. With regard to the inflation assessment, the bank finds that the modestly lower pace at the June meeting (1.80% core PCE yoy vs. 1.88% at the May meeting) has not historically been enough to warrant a downgrade to the inflation rate (from “close to 2 percent”).

And yes, this is the kind of "analysis" you do if you are an economist with way too much computing power and time on yours hands.


ravolla Never One Roach Wed, 06/13/2018 - 14:06 Permalink

HELLO SPAM-LOVERS!!!   BIG UP from the SPAMMER BUNKHOUSE here in the Methfilled Valley Trailer Park in Methfilled Valley, PA.  Good to see my men bobcatz and  cheoll and  Leakanthrophy and Wadalt and  PrivetHedge  and our newbies  ll951983  and  gzcekkyret  out from under the couch sucking their own dicks and back on the threads SPAMMING like a Grease Fire!!!! 

Biblicism     AND    TodaysFox ("I made $7000 sucking cock on the Internet")  IT's ALL THE SAME SPAMMER!

THIS is an important week here in the SPAMMER's BUNKHOUSE (the leaking moldy single-wide in the trailer park).  This week I (we?) are celebrating SEVEN YEARS here on ZH, obsessively SPAMMING every thread we can with off-topic comments.  You see, there are dozens of "personalities" living in this one single sad SPAMMER's sick little mind, which he calls "Spammer's Bunkhouse."  How sick is that? 

Each of "us" (these innumerable fake log-on's) is represented by an ACTION FIGURE that Master Spammer ("DARWIN" is his name -- can you believe that?)  lines up on his kitchen counter and TALKS TO!!  WHACK JOB!!!


SAD BUT TRUE!!  I (we?) have wasted my (our) youth (or at least the last seven years) with at least one hand in my pants and the other hand SPAMMING ZH.  Yes, indeed.  DOZENS and DOZENS (maybe hundreds) of log-on's banned -- 
>>  "I made $7500 last week on the Internet sucking cock!": that's me.
>>  Biblicism: that's me.
>>  All the porn at Celebrity-leaks: that's me.
>>  Daily Westerner: that's me.

>>  "In the news....SPAMMER broomsticked by furious readers" -- registered in Nigeria) :: that's me TOO!! 

That's our life (all of us living in Master Spammer's Mind): mopping the floor at the Porn Cinema at 2am, working the French Frier at SONIC (demoted from the drive-thru window 'cuz my ZIT-covered face scared the customers), sucking cock on the Internet, and spamming ZH with an enormous Excel spreadsheet of the log-on's of dozens of "digital friends" who upvote one another and virtually suck my little micro penis..

MEET my current imaginary friends.  We all live in one SPAMMER's HEAD (and as ACTION FIGURES on his kitchen counter) but as for me, I have gone off the reservation.  These other "personalities" are pretty troubled.

ll951983  <<< NEWBIE  sucks cock on the Internet!
  <<<  NEWBIE
Cheoll   <<<  NEWBIE

Mr Hankey  [R.I.P]   <<<  total utter WHACK JOB  -- joined "The Fallen"
gzcekkyret     <<<  NEWBIE

You know SPAMMERS never die on ZH -- here's just a sampling of the banned log-on's ("The Fallen Spammers") ---

 beepbop, pier, lloll, loebster, ergatz, armada, Mtnrunnr, Anonymous, luky luke, Cjgipper, winged, moimeme, macki mack, tchubby, sincerely_yours, HillaryOdor, winged, lexxus, kavlar, lhomme, letsit, tazs, techies-r-us, stizazz, lock-stock, beauticelli, Mano-A-Mano, mofio, santafe, Aristotle of Greece, Gargoyle, bleu, oops, lance-a-lot, Loftie, toro, Yippee Kiyay, lonnng, Nekoti, SumTing Wong, King Tut, evoila, rp2016, alt right dude, altright-girl, alt-right girl, Blufin, Schlomo Scheklestein, BraveForce, Mr Hankey, sandraloopz0, enf83

In reply to by Never One Roach

Jack McGriff bobcatz Wed, 06/13/2018 - 13:30 Permalink

No, the Jew FED owns YOUR ass and everyone else's ass in America.  We are its slaves because our labor is taxed to the extent it takes 3-4 months each year of full time work just to pay taxes, a goodly portion of which is paid directly to the Jews for their usury fees.    

"The Creature from Jekyll Island" is the veritable Bible on the subject and how the FED was designed to fleece Americans in perpetuity.  This was only possible because of the many traitorous white liberals and other tares among the wheat who will gladly take 30 pieces of silver for a life of leisure and security in exchange for handing YOUR ASS over to the FED to slave away and pay taxes for your entire life.

Oy vey, this kerfuffle even has a cherry on top because even if you slave away your whole life to squirrel away a little nest egg, well, if the insidious theft of inflation hasn't made it useless for its primary purpose, then the stress you've endured and the consumption of poor quality of food coupled with little to no exercise during your life will cause major medical problems that will bankrupt you.  But only if you don't die before you retire, or drink or drug reality away so as not to think about how fucked up this place has become.  It's all part of the plan.   

Nothing to see here. Just make sure you fund your 401k.  There are millions of niggers working in the government counting on it to fund their bankrupt pensions! 

In reply to by bobcatz

LawsofPhysics Wed, 06/13/2018 - 12:12 Permalink

Like it matters...

...the "let the majority eat cake" monetary experiment and socialization of private losses will continue!

"Full Faith and Credit"

same as it ever was!

Conax Wed, 06/13/2018 - 12:19 Permalink

They can't come out and say, "Look, we're all fucked, this sucker's goin down! Ahhhhhh!"

So they say, "Employment is rocking, the econ is overheating, we must raise rates .025% to accomodate your success. You're welcome."

Quivering Lip Wed, 06/13/2018 - 12:36 Permalink

Cut and paste from 2012. Fuck I wish I could get paid to regurgitate the same shit for half a decade, and be wrong about it.

Normalization of rates is impossible at this point unless of course the FED wants to consolidate even more in the future.

Serfs up bitchez.