30 minutes in between the dots and Powell
I suspect the Fed regrets every going down the dot plot rout on a day like today. Officials will want to signal patience on raising rates but if just four FOMC participants move their dots for 2023, then the 'consensus' will be a hike that year.
We're also going to get the debut of the 2024 dots and that means more talk about hiking rates.
Of course, the rates market is already pricing in an 80% chance of the central bank raising interest rates by the end of next year but I see that as more of a sign of managing the tail risk that inflation accelerates.
In any case, I expect the main takeaway from the headlines to be focused on the dots and hawkish.
It will be up to Powell to reel that in and that's exactly what I expect from him. In all his recent speeches he's emphasized patience and all the unemployed Americans. It will take a long time to soak that excess up and that will be his message. I don't expect any kind of hint at a taper.
So buy the dollar and sell risk on the statement and reverse it on the press conference is the trade I see unfolding. Of course, the recent trend has been lots of kicking and screaming through Friday following the Fed, so that's something to keep in mind.
