A very brief snippet from the Bank of America Federal Open Market Committee (FOMC) preview. Bolding is mine, this is going to be a very interesting meeting:
- We expect the Fed to revise its outlook in favor of stronger growth and firmer inflation while leaving unemployment near multi-decade lows.
- We think it still guides markets to a cutting cycle that begins in June, but the clear risk is it defers cuts.
- The Fed will begin discussion about its balance sheet plans. The focus will be on when and how much to taper Treasury run-off caps.
The dots:
- In the dot plot, we expect the median member to continue to forecast three cuts in 2024, four in 2025, a terminal of 2.9%, and no change in the median long-run dot.
- This may be fanciful thinking on our part, but there are several inflation reports and plenty of time between now and June to change course if needed.
- The clear risk is less confidence on inflation reduces the number of cuts in 2024, if not 2025.
