FOMC seen broadly ‘on hold’ today – TDS

Strategists at TD Securities expect the FOMC to keep its monetary stance unchanged at today’s meeting, although the statement could reinforce the case for a rate hike in December.

Key Quotes

“The Fed is universally expected to keep policy rates unchanged. With no press conference or SEP, Fed messaging centers on the statement. We think the Fed will provide a message of progress and slightly upgraded language since September, but fall short of the more explicit “next meeting” flag they provided in 2015 to set up the December 2015 hike”.

“The statement is expected to indicate an improvement in economic conditions given confirmation of the Q3 growth rebound and to suggest all risks – not just “near-term” ones – have improved. The Fed could also acknowledge that the case for a hike has strengthened further without nailing down how much more they need to see”.

“These three main tweaks to the statement should keep year-end expectations intact but retain the Fed's optionality given uncertainty over data and the ensuing financial market response to the election results”.