Credit Agricole provides insights into the upcoming January FOMC meeting, focusing on the Federal Reserve's potential response to current market expectations.
No Change in Rates Expected:
- The Federal Reserve is likely to maintain the current interest rate range of 5.25-5.50%, marking the fourth consecutive meeting without a rate change.
March Meeting for New Economic Projections:
- Updated economic projections and a revised dot plot are not expected until the March meeting, placing greater emphasis on the current meeting's guidance.
Fed’s Pushback on Market’s Easing Expectations:
- Chair Jerome Powell is anticipated to avoid committing to a specific timeline for easing in his press conference, countering the market's aggressive expectations for rate cuts.
Statement Language to be Scrutinized:
- The key aspect of the statement will be whether the Fed retains the language regarding "additional policy firming," which would suggest that rate cuts are not immediately forthcoming.
Market Pricing Deemed Excessive:
- Credit Agricole views the market's current pricing, which shows a high probability of a rate cut in March and significant easing throughout the year, as overly aggressive.
Credit Agricole predicts that the January FOMC meeting will be a pivotal moment where the Fed is likely to challenge the current market expectations for rapid and significant easing. The focus will be on the Fed’s guidance and language, which could hint at a more cautious approach to rate adjustments than the market currently anticipates.