Via HSBC, their preview (in brief, bolding ... is theirs!)

No press conference, no policy change

  • The FOMC has made it a practice lately of only changing policy at meetings that are followed by a press conference for the Committee Chair. There will be no press conference after the 31 January meeting, nor will there be an updated Summary of Economic Projections (SEP). The next press conference, scheduled for 21 March, will be the first with Jerome Powell as chair.

FOMC forward guidance for three hikes in 2018;

  • more "hawkish" voting panel The Committee's median projection for the federal funds rate at the end of 2018 implied that three 25bp rate hikes would be appropriate over the course of the year. We expect that low inflation will limit the Committee to two rate hikes this year. As well as a new chair this year, the FOMC's voting panel will undergo its usual turnover. As we explain in the report, the rotation makes the panel a bit more hawkish than before.

January policy statement likely to preserve current forward guidance

  • The Committee will issue a policy statement, but it is unlikely, in our view, to change the current assessment of economic conditions or to change forward guidance on policy. We expect an upbeat assessment of the economy. The statement is likely to note that job gains have been solid, and that business investment is picking up. We think that references to hurricane-related disruptions, which appeared in the last three statements, will be dropped. Year-over-year core PCE inflation fell from 1.9% in January last year to 1.3% in August before stabilizing over the last few months. At 1.5% in Q4, core inflation is still well below the FOMC's 2.0% medium-term target. We think it is too soon for any change in the FOMC's assessment of inflation.

Committee still on course for a rate hike in March

  • The futures market for federal funds has priced in an almost 90% chance of a 25bp rate hike at the 21 March meeting. We think the January policy statement will do nothing to diminish the expectation of the Fed taking another 25bp step along the path of policy normalization in March.

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