Deutsche Bank: FOMC Preview - FJElite
- With policy "well positioned" to address risks to the outlook, the Fed is set to extend its pause at the April FOMC meeting. The key question is whether they formally adopt two-sided language about the policy outlook in the statement and/or Powell indicates a more balanced risk assessment in the press conference. Our base case is they will wait until the June meeting for meaningful changes to guidance, but the risk is that communications skew more hawkish.
- We expect limited changes to the post-meeting statement. Intermeeting data continue to support the Fed's description of growth as "solid", job gains "low", unemployment "little changed", and inflation "somewhat elevated". A more hawkish posture could come from a modification of the language around "additional adjustments" or by describing risks to the dual mandate as (roughly) balanced.
- The impact of the ongoing conflict in the Middle East will be the focus of Powell's presser. With uncertainty still pervasive, we expect he will emphasize that officials are unsure of the precise fallout from the war on the economy and monetary policy. However, Powell could highlight that persistent price pressures become more likely the longer oil prices remain elevated. We also discuss what Powell might say on inflation, the labor market, AI, the balance sheet, and more.
- In our recent outlook update, we removed our final rate cut from September and now see the Fed indefinitely on hold at neutral. The April FOMC meeting will not confirm this outlook, but we expect Powell's overall tone will be consistent with a Fed that expects to be on hold for some time.