FED: Any Balance Sheet/Admin Rates Discussion Eyed, Analysts Mixed On Tone (3/3)

In more of a curiosity, we will be intrigued by how Miran's last-minute introduction to the Committee translates into the description of the proceedings. In particular it will be no surprise given his dissent and “dot” for 150bp of cuts this year if there is “a” participant that argues vociferously for aggressive front-loaded cuts.

• We'll be looking for any discussion about balance sheet policy. The meeting preceded September’s quarter/month-end pressures and drawdown of reserves below the $3T mark, and it may soon be time for the Committee to make decisions about how it will handle the transition from abundant to ample reserves. (We note also that the NY Fed’s latest survey of market participants should be out today, offering the latest consensus take on when QT will end and at what size of Fed balance sheet.)
• Additionally, Dallas Fed President Logan’s comments on the Fed selecting a new policy target rate (she eyes TGCR) to replace the Fed funds rate raise the question of whether the FOMC discussed more technical operational aspects at this meeting.

Some sell-side analysts’ identified areas to watch:

• BMO: “will be of particular relevance as it relates to the Fed's recent shift toward outweighing the employment aspect of its mandate over inflation. The benchmark revisions and lackluster payroll gains this summer were an inflection point for the Fed and investors. After all, the loss of the ‘labor market is resilient’ mantra has ushered in a re-think of how restrictive policy has been and, therefore, how quickly the Fed should seek to return to neutral. As September was Miran’s first FOMC meeting, the market will be watching the Minutes for any response on the Committee to his decidedly more dovish stance, even if the tone of the official communication will surely err on the side of diplomatic.”
• BofA: “we will be looking to understand why the Fed projected deeper cuts than in June despite moving to more hawkish macro forecasts.”
• Deutsche: “Though we have heard the majority of Fed officials since the meeting, the minutes could nonetheless shed some further light on the wide rift amongst officials with respect to the policy outlook… Aside from views on the current policy outlook in the minutes, we will also focus on potential staff presentations related to the Fed’s policy implementation framework.
• ING: “What we’ll be looking for in the minutes is evidence that Chair Jerome Powell’s cautious view on further cuts is shared by the majority of the FOMC. The risks appear slightly tilted to the dovish side and therefore to a negative USD reaction to the minutes.”
• Natixis: “The debate was likely lively given the vastly different economic forecasts and disperse views on the Fed’s appropriate reaction function to ongoing economic developments.”
• TD: “likely to highlight the division on the Committee between the hawks and doves. Most participants likely saw the policy recalibration as necessary. However, we expect some participants saw further easing this year as unlikely given tariff-driven inflation risks. Many participants likely anticipate further easing owing to labor market risks.”