The FOMC decision is on Wednesday
Former PIMCO co-head Mohamed El-Erian is out with a Fed preview. He urges the FOMC to follow the Bank of Canada by tapering QE and pulling forward the timeline for hiking rates but he doesn't think that will happen.
El-Erian believes the Fed will upgrade the economic assessment but accompany it with caveats about the virus and uncertainty.
" It will maintain policy as is, remind markets that it is willing to do even more should downside risks materialize and play down the risk of inflation and other overheating as transitory," he writes.
He argues the Fed is making its eventual job on normalization harder by waiting longer.
I wanted to highlight this because it will no doubt be read and heard by FOMC officials. The pressure is going to ramp up in the next few months. I don't think it really matters what the Fed does this week (baring a BOC shock) but I'll be looking for hints on whether Powell is losing his nerve. It will only get tougher from here.
