Here are some analyst comments on the upcoming FOMC meeting. From Nomura:
We expect the September FOMC meeting to give us additional insight into the future path of monetary policy. We will receive another round of FOMC forecasts for the first time since June, which will incorporate significant new data. Forecasts should also be extended to 2017, thus giving us a better sense of how the participants judge the current balance between actual and potential output.
We expect the FOMC to make changes to its forward guidance. At a minimum, we expect the FOMC to add language that stresses the “data dependence” of future interest rate decisions. We expect the FOMC to continue to state that the adjustment of interest rates, when it comes, will be “balanced” and that it expects interest rates to converge to normal levels more slowly than employment and inflation. But in light of sustained improvement in labor market performance, and the inherent complexities in assessing their state, we expect that the FOMC to drop its assessment that “lift-off” is still a “considerable time” away
From Merrill Lynch:
[P]inpointing the exact timing of the first rate hike is more of a guess than a forecast. Nonetheless, the case for an earlier move has grown over the last several months. … The more immediate question is: when will the Fed change its rhetoric enough to scare the markets? In particular, could the FOMC do something big in its announcement on Wednesday? It is hard to predict the specific changes, but the risk of a hawkish signal is high:
• Given the soft August jobs report, we expect them to continue to see a “significant underutilization of labor resources.” That language change probably requires a couple of better jobs reports.
• It is a close call, but we expect them to modify their promise to keep the funds rate near zero for “considerable time.” However, they will try to change the statement in a market neutral fashion, dropping the reference to “considerable time” and substituting “considerable reduction in slack and notable progress toward the inflation goal.”
• We expect small changes in the FOMC forecasts. In particular, we see some risk of another uptick in the “dot plot.” At this meeting, they introduce forecasts for 2017, and we expect median “dots” of 3.25 to 3.50%.
• Finally, we think Yellen and her allies will try to avoid shocking the markets. In the past, when the FOMC has reworked its forward guidance, they have often softened the blow by explicitly noting that their view on the likely timing of the exit has not changed or by downplaying the change in the press conference.
And from Goldman Sachs:
With respect to the appropriate timing of the first hike of the funds rate, recent comments point to a greater clustering of FOMC participants’ views around mid-2015. In particular, one or two FOMC participants (namely, Presidents Lockhart and Rosengren) have likely pulled forward their views on the most appropriate date for liftoff; there is nothing to indicate that those previously expecting a mid-2015 hike have moved; and the more hawkish participants have also likely stayed in place.
CR note: I’ll post some thoughts on the upcoming meeting this weekend.