FOMC Preview: Meeting to underscore the Fed's patient stance beyond December - TDS

Analysts at TDS expect the Fed to raise the fed funds range by 25bps in December, as near universally anticipated.

Key Quotes

“The Fed is likely to be prudent in its messaging with the aim to allow markets a chance to digest and reassess expectations rather than add fuel to the fire. We expect the meeting to underscore the Fed's patient stance beyond December, evinced in the statement, little change to economic projections and an unchanged pace of normalization in the dot plot.”

“The press conference will draw attention for any flags of a more hawkish stance in anticipation of fiscal stimulus, which we think Yellen will be careful to avoid. Instead, we expect the Chair to reinforce a patient stance in highlighting the scope for further reduction in labor market slack and the downside risks associated with USD strengthening.”

“Our baseline scenario implies a relatively quiet landing for the USD, with most of its remaining upside potential realized ahead of the meeting. We could see some correction in front end rates, with highest conviction for 5s30s steepeners, followed by small longs in 5s and long breakevens.”