FOMC statement should emphasize continuity – TDS

The January FOMC statement should emphasize continuity, with no significant changes even as Powell is poised to take over as Chair and new voters rotate onto the Committee, according to analysts at TDS.

Key Quotes

“The main risk to our base case would be if the new voters shifted the balance of risks in a more positive, hawkish direction, which would force the market to reprice higher the path of rate hikes this year.”

“Rates: Markets are nearly fully priced for a March hike (90%) and look for nearly 2.6 hikes in 2018. The threshold for a hawkish surprise is high.”

“FX: The USD should remain on the defensive though a realization of hawkish risks may help to temporarily stop the bleeding.”