Look for a small downgrade to household spending

Barclays Research discusses its expectations around tomorrow's FOMC rate decision.

"We expect the FOMC to leave the target range for the fed funds rate unchanged at 1.50-1.75%. In the statement, we expect only minor changes, with adjustments to the wording used to characterize household spending (such as a downgrade from "strong pace" to "solid pace"); and look for an upgrade to the language describing job gains.

Overall, the updated projections should underscore the committee's message that the economy is in a good place, with GDP growth running in the vicinity of 2%, inflation near the 2% target, the unemployment rate edging lower from its recent levels, and the policy rate headed in the direction of neutral over the medium term. We expect a few changes from September, with downward revisions to PCE price inflation and the unemployment rate in 2019 to reflect incoming data, and a lower median rate path in 2020 and 2021 to reflect October's insurance cut," Barclays projects.

"In the press conference, we expect Chair Powell to drive home the main takeaway from the October meeting, namely that further adjustments to its policy rate will not occur absent a material reassessment of the outlook. We do not expect any meaningful announcements regarding measures to address funding pressures in overnight markets, in part because the committee would prefer to announce such changes inter-meeting in order to distinguish this issue from monetary policy," Barclays adds.

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