EURJPY TECHS: MA Studies Continue To Highlight A Bull Cycle

• The penultimate paragraph (in assessing...) has been left unchanged for several meetings and won't be changed here.
• MNI’s Instant Answers questions for the meeting include whether there are dissenters.
• Assuming a 25bp cut, this meeting may have as many as 3 dissents in favor of a larger 50bp cut: Vice Chair Bowman, Gov Waller, and new Gov Miran. (Waller and Bowman dissented to July's hold in favor of a 25bp cut).
• If so, it would mark the first time since 1988 that 3 Board members dissented (per Deutsche Bank).
• It’s also possible a regional president dissents in favor of a hold (if so, it would likely be Kansas City’s Schmid).
• In the Implementation Note, no changes to the administered rates are expected.

Analyst Consensus: The statement is widely expected to revise the language around the characterization of the labor market, to reflect the rise in unemployment and slowdown in payrolls growth. 

• There are no expectations that the Fed will change the language re the description of inflation, or the 2nd paragraph’s balance of risks. However we saw one expectation that the Fed could alter the forward guidance sentence (Citi: To remove “and timing”).
• Miran is widely expected to dissent in favor of a 50bp cut, but opinion is extremely mixed about whether other participants will dissent (in either direction).

Going paragraph by paragraph through the previous (July) statement in italics, with areas of interest for the September statement highlighted ( Link to July FOMC statement )

• The resumption of rate cuts at this meeting will necessitate some pretext for the decision, both in the projections and in the Statement. That starts with the opening paragraph which is likely to change the description of labor market conditions, removing the reference to them remaining “solid” and referring to the recent slowdown in payroll growth and rise in the unemployment rate.
• “Inflation remains somewhat elevated” doesn’t require changing.
• The description of economic activity – that in July referred to activity – needs some cleaning up now that we are two months into the third quarter, potentially noting that growth has settled into a solid pace after a volatile first half.
• The language regarding the balance of risks is in danger of shifting to reflect weakening in labor market conditions, but given still-solid incoming inflation prints and risks on the tariff front, the Committee will be content to keep this paragraph unchanged.

• The Statement will of course announce the rate cut decision, but we don’t expect any change in the forward guidance “in considering the extent and timing…”, as it gives the Committee optionality to ease further in future meetings or return to a holding stance, depending on how the data unfolds.

Statement /  Press Conference: With no Monetary Policy Report released at this meeting and thus no new economic projections, there will be initial attention on the decision statement which is expected to remain non-committal on future cuts but retain the overall easing bias. That’s a tone likely to be echoed at the press conference.

• While Governing Council’s message will probably reiterate they are proceeding “carefully” with a meeting-by-meeting approach, the overall meeting communications will leave the door open to another rate cut in October if data continue to develop in a similar direction over the interim period.

MNI's Instant Answers for the BOC decision focus on any signals on future rate moves sent from the 0945ET release Wednesday. They are:

• Target for overnight rate:
• Does the Bank say the case for further rate reductions is strong?
• Does the Bank reiterate it could LOWER rates if the economy weakens and inflation is contained? 
• Does the Bank mention core inflation has been elevated?
• Does the Bank say growth or job market prospects have weakened?
• Does the Bank say it may be less forward looking with policy?