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Friday, April 20, 2012

FT Alphaville: FOMC pre-preview

by Calculated Risk on 4/20/2012 09:27:00 PM

From Cardiff Garcia at FT Alphaville: Flies in the Fed’s ointment

Yep, nearly time to start talking about the next FOMC meeting, a two-day affair that begins this Tuesday.

Any big decisions regarding further quantitative easing are more likely to be taken later, closer to when Operation Twist is scheduled to end in mid-June. (Expect to see more stories using the “wait-and-see mode” formulation.) But on the schedule is the second iteration of the individual participants’ federal funds rate projections, and that could be interesting.
Garcia quotes Neal Soss at Credit Suisse regarding the FOMC participants' projections of the appropriate target federal funds rate:
"While we expect that 2014 guidance to be reaffirmed at the April meeting, we also think it likely that the distribution as a whole would shift slightly inward in time."
So the distribution of projections will be closely scrutinized (this allows the "hawks" to argue for raising rate sooner, even though the 2014 guidance will almost certainly be reiteritated.)  Garcia concludes:
It’s true that the US economy is on surer footing now than six months ago, but recently we’ve also had a payroll report that was weak relative to prior months; home prices have continued to fall; and the downward trend in jobless claims was revealed to be less impressive than we thought and even might have stalled (yeah, we know, the last one could just be seasonality issues). European debt markets have again become a focal point and there’s no way to know how fiscal-cliff-mageddon will turn out.
CR: I'll have another preview in the next few days, but I don't expect any significant changes announced next week.