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The FOMC meeting later this week takes center stage
That makes it the key risk event for the market but are we really expecting anything big?
Not really, or at least not something too game changing at this stage.
To cut things short, the Fed is likely to repeat the same language on policy and reiterate patience when it comes to transitioning to tighter policy. Adding to that, they are likely to stick with the view that inflation remains transitory through the year-end.
That said, the market will continue to look for any clues on any possible hawkish shift and that is likely to be observed in their assessment of the economic outlook and also the projections that will accompany the decision today – not to mention the dot plots.
Those subtle shifts could hint at a shift in policy direction going into August or September but barring any major changes to the language or tone, it would be tough to see the market commit to pricing a straightforward hawkish Fed this week.
But still, it’s best to be prepared for any surprises. As is always the case.