Summary: The July FOMC meeting concludes tomorrow and the Fed will release the post-decision FOMC statement, but Chair Yellen is not scheduled to give a press conference and there will be no forecast update. Do not expect the Fed to move the policy rate at this week’s meeting and we see little necessity to change the statement this week. Aside from small tweaks to update the current situation, we think the Fed’s broader stance on the economy and the timing / pace of tightening has not changed enough to merit a large change in this meeting, particularly one without new forecasts or a FOMC press conference.
Our expectation that much of the key language is left unchanged should do little to shift market pricing of the Fed rate expectations. Even so, with the market pricing in a near certain chance of no change tomorrow and just a 31% chance of a hike in September and less than one full hike this year, a lack of a clear signal that the Fed’s consensus view is shifting in the dovish direction may be a modest support for the USD.
(Royal Bank of Scotland)