Barclays Research discusses its expectations for tomorrow's FOMC policy meeting.
"We expect the July meeting to be focused on strategy, including how to taper when the time comes and finalizing the design of the standing repo facility. On the “how” of tapering, we continue to believe that the committee will taper its purchases mortgage-backed securities and Treasuries simultaneously and proportionately. While we strongly doubt that participants have seen enough progress to signal tapering is forthcoming, we think the Fed’s communication will become incrementally more hawkish in the assessment of the balance of risks," Barclays notes.
"Rather than saying the committee is “prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee’s goals”, we expect the July FOMC statement to say the Fed would be prepared to adjust policy if it “saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal," Barclays adds.