Société Générale on what to watch for at the Federal Open Market Committee today (Wednesday 20 September 2017 US time)

(In summary, bolding mine)

The Fed is almost certain to announce a change to its reinvestment policy at the September FOMC meeting, indicating that the reduction in its holdings will begin in October. The start date for the tapering is the last piece of information that markets need to hear, but the announcement has been well telegraphed, so it may be somewhat anticlimactic.

  • starting the process in October allows Fed officials to put the program on auto-pilot and refocus squarely on the economic fundamentals, which will be increasingly necessary given that the data are likely to be choppy in the wake of the hurricanes
  • it provides a buffer between the start of the tapering process and the December FOMC meeting, giving the Fed some time to gauge the market's reaction before deciding on a December hike

Instead, market participants may be more focused on the language changes to the FOMC statement, especially in the wake of the hurricanes, as well as the updated Summary of Economic Projections (SEP).

  • In particular, with market expectations for another rate hike this year below 50% and at low levels for future hikes, investors will be especially keen to see if the median funds rate path is lowered. While we would not completely rule that out, we suspect that those looking for a lower path could be disappointed.
  • The hurdle for a drop in the median this year and in 2018 is fairly high

But, says SG:

The dots are likely to have a more dovish tilt in the sense that some participants with dots above the median are likely to lower their expectations

  • In other words, the top end of the distribution could come down this year, next year, and in 2019

With Vice Chair Fischer due to attend the September meeting and thus likely to submit his projections, there will be 16 dots.

  • In June, four officials expected no further rate hikes in2017 (1.125%),
  • eight expected to hike once more (1.375%),
  • and four others anticipated two further hikes (1.625%).

In order to move the 2017 median dot down to indicate no further hikes this year, at least five participants would have to move to the 1.125% camp.

  • However, that seems like a tall order given the continued strengthening in the labor market, improved overseas growth prospects, and easier financial conditions.
  • To be sure, Fed officials have been concerned about the softness in inflation, but as we wrote following the CPI, they were likely heartened by the strength in the August core rate.
  • Additionally, in our opinion, the bottom four dots likely belong to Bullard, Kashkari, Brainard, and Evans. That means that the camp of eight officials looking for one more hike this year very likely includes Powell, Yellen, Dudley, and Fischer.
  • If Dudley's recent comments are any indication, we suspect that this core group will wait to see more inflation data before abandoning a December hike, so we do not expect that five of eight will move down, although one or two of the other eight may shift lower.
  • Still, even if one or two people do move lower, some, or all, of the four officials at 1.625% could move down into the 1.375% camp, strengthening the median this year.
  • The median is unlikely to change, although the fact that some participants abandoned the idea of a second hike this year could be viewed as dovish.

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A lot of nitty-gritty there from SG. It highlights how there is is going to be plenty of volatility on the announcement as there are a so many moving parts - QT, dots, Yellen speaking ....

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Ps. I am going to collate the FOMC previews ForexLive has posted separately.