- Will they drop the ‘considerable time’ phrase when it comes to policy normalisation?
It is believed this phrase signifies that the FOMC are 6 months away from tightening. If it goes the markets will begin to price in the likelihood that the first move will occur in late Q2 rather than Q3 as markets currently have priced. Also watch out for any dissentions from members at the bottom of the statement. In October only Kocherlakota, a noted dove, voted against the policy action. Clearly the Fed were moving towards a more hawkish stance back then. Will that remain the case in December?
- The ‘Dot’ chart and FOMC economic projections.
During their September FOMC meeting Fed officials forecast that GDP, unemployment and core PCE price inflation, their preferred inflation measure, would be between 2.6-3.0%, 5.4-5.6% and 1.6-1.9% respectively in 2015. GDP and core PCE were both slightly lower than what was seen in June while unemployment was revised slightly higher. Any significant changes to these forecasts will offer an insight as to reasons behind the wording of the policy statement. The dot chart, something that can be used to provide the mean FOMC rate forecast will also be influential. The below chart shows how Fed members have been gradually moving forward expectations for rate hikes over the course of 2014.
- Janet Yellen’s Press Conference
This often moves markets more than the statement and economic projections combined. I suspect she’ll get asked plenty about the recent strengthening in the USD and possible impacts it may have on the US economy.