COVID | Monetary Policy & Inflation | US
September 2020 FOMC Preview: Struggling To Enhance Their Extreme Dovish Stance
- By Dominique Dwor-Frecaut and George Goncalves
- 3 min read
Economic uncertainty and recent signs of a slowing recovery suggest the Fed will maintain its cautious outlook and the 2021-22 Summary of Economic Projections (SEP). The Fed will look for ways to enhance its extreme dovish bias without spending much actual policy ammunition. Chair Powell will likely use the press conference and the SEP to do so.
Fed Economic Outlook Likely Unchanged
We expect the 2021-22 SEP to remain broadly unchanged, though the 2020 forecast will get updated to reflect stronger unemployment and inflation than in the June SEP. In addition, the second paragraph of the FOMC statement is likely to include some mention of the recent signs of recovery slowdown. Finally, the Fed could lower the LR dot to signal its commitment to extreme dovishness. We base our view on the Fed risk management strategy, their economic narrative and on recent data.
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