A new trading landscape on Fed decisions is just beyond the horizon
I can't seem to find any official announcements apart from a Bloomberg article on this but looking at the Fed's website, the 2019 schedule itself doesn't separately state a press conference by Powell to follow in the usual quarterly fashion; as was the case this year.
The article reports that (Powell made a mention of this in his last presser earlier this month) Powell plans to hold a press conference in each of the eight FOMC meetings next year as opposed to the one every quarter that we see now - alongside the Summary of Economic Projections.
Although I reckon markets will get a feel of things after a while but the shake up here will definitely be something that traders will have to take more notice of moving forward:
- Added risk of market-moving comments in the presser
- Every meeting becomes 'live' as Powell could help communicate better messaging
- Fed fund futures pricing will be more erratic rather than the current scenario*
*whereby one meeting is seen at 0% hike probability, the next being >90%
However, there are two things seen limiting the Fed's capacity to move away from the current rhythm of tightening policy.
One, is that they risk disrupting market expectations and will only serve to heighten volatility across financial markets. An unpredictable Fed will make for unfavourable market conditions but if the Fed uses this to communicate better then it could be a calming hand for markets in general. At the same time, it's not clear if the Fed will move away from deciding on any rate changes when not briefing markets about their latest projections - which is still only once every quarter.
Second, is that the Fed is nearing neutral rates already. So, why bother with shaking things up when they can just as easily stick to the current script? It'll be much easier for them to cope by retaining the status quo than to throw a curveball at markets so that's an argument against using these extra briefings to communicate rate changes.
Whatever the case is, the fact that we have the potential for market-moving comments by Powell in every meeting will surely make for more anticipation and expectation/pricing by markets and that will create added volatility surrounding each Fed decision next year.
