Bank of America (BofA) expects no surprises from the Federal Reserve at the September FOMC meeting. They anticipate the Fed will keep the federal funds rate target range at 5.25-5.5%. Instead, BofA posits that the focus for investors will likely be on the Summary of Economic Projections (SEP), which may offer crucial insights into the future trajectory of the U.S. Dollar (USD).

Key Points:

• Status Quo Expected: BofA expects no change in the federal funds rate or the Fed’s balance sheet policies.
• SEP in Focus: The bank expects one more 25bp hike in the 2023 median policy rate forecast, bringing the terminal rate to 5.5-5.75%.
• 2024 Projections: BofA anticipates that the 2024 median policy rate forecast will shift up by 25bp to 4.875%, implying just 75bp of cuts for next year.

Analysis:

For Forex Traders:

Currency Strategy: Given the likely stability in interest rates, traders should keep a close eye on adjustments to the SEP. Changes in the dot-plot could be the primary driver for USD’s near-term outlook.

For Investors:

Investment Implications: Stable federal funds rates indicate a status quo in the investment landscape. However, alterations in the SEP could provide more long-term signals about economic prospects.

For Economists:

Monetary Policy Implications: Economists should closely scrutinize the updated SEP to gauge the Fed's view on future economic risks and policy tightening or loosening scenarios.

The Takeaway:

Bank of America doesn't foresee significant changes in interest rates in the immediate future, making the SEP the focal point of this FOMC meeting. Whether you're a trader, an investor, or an economist, stay tuned for adjustments in the SEP's dot-plot, as they may significantly impact the USD and offer broader economic insights.