A hawkish Fed or not? This will be the question

Opinions are quite divided on what the Fed could communicate later today. Let’s take a look at what the analysts are saying (h/t @ MNI – Market News).

Barclays
– First 25 basis points reduced only in September or December
– “Powell should mention that recent data has not given the FOMC greater confidence in disinflation and that it will likely take longer than expected to achieve that confidence”

Citi
– First reduction of 25 basis points in July
– “We do not expect a new hawkish turn at the May meeting”
– “There is a risk of hawkish headlines if Powell is pressed for hikes, but that would simply reflect the logical conclusion that there is an inflation scenario in which higher rates are needed, and that would be a long way off of the basic scenario”

Deutsche
– First reduction of 25 basis points in December
– The Fed will deliver a more hawkish message
– Statement could see language change to clarify lack of further progress since March
– Powell will stress that there is no urgency to cut rates given the resilience of the economy
– “We also think he will not actively maintain the prospects of a rate cut in July”

Bank of New York Mellon
– QT reduction will be announced
– “Powell’s statement and press conference will be more hawkish on rates, given Powell’s recent comments and data developments in recent weeks”

Morgan Stanley
– First reduction of 25 basis points in July
– The declaration should be little modified but could take a more hawkish direction
– Powell stresses that he expects rate cuts “at some point”, but the Fed could wait “longer than expected” to cut rates.

J.P. Morgan
– Little modified declaration
– “If we are asked about the possibility of further increases, we expect Powell to indicate that this is not his base case but also something he cannot rule out”

Goldman Sachs
– First reduction of 25 basis points in July
– Powell could reiterate his previous comment that “it will probably take longer than expected to achieve that greater confidence” needed to reduce spending.