JPM: Debate Over Asymmetric Policy Bias

JPM sees the July meeting as less eventful than June's "hawkishly-perceived" meeting, but note that Powell's July congressional testimony "raised the prospect that the FOMC statement would introduce an asymmetric policy bias: standing prepared to adjust policy if the Fed 'saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal."

• So, JPM sees the increasing prevalence of the Delta Covid variant raising downside growth risks which "should help the doves argue for retaining the current symmetric policy bias".
• The "material and persistent" phrase on inflation Powell said in his congressional testimony isn't new – as it appeared in his June FOMC press conference prepared remarks – but in the testimony "it was reordered to give the impression that policy is now biased toward reacting to inflation risks. If this language were repeated in the statement it would represent a new, asymmetric risk bias."
• Look for updates on FOMC's thinking about tapering in Powell's prepared remarks. After "a long way from" in April and "still a ways off" in June, Powell could say something like "still has further to go" before substantial further progress is met.
• Future action: December taper announcement.