BNP on FOMC: dovish on the policy rate outlook, more hawkish on the balance sheet

From eFX on the Federal Open Market Committee announcement and statement

BNP Paribas Research comments on today's July FOMC policy statement.

"The main message from the July FOMC statement was that the Committee is very likely to announce the starting date for running down its balance sheet at the September meeting, but it is worried about inflation and sees a softer consumer.

....The policy message we take from the statement is that the FOMC has become more sensitive and reactive to economic data when it comes to short rates, but the balance sheet normalization policy, being a much longer-term strategic operation, is far less so.

That leaves us with the very firm conclusion that this statement was dovish on the policy rate outlook, but more hawkish on the balance sheet.

We continue to forecast the announcement of balance sheet reduction at the September meeting, no more fed funds hikes in 2017, and three hikes in 2018, beginning in March," BNPP argues.