MNI Fed Preview - May 2024: Analyst Outlook

Apr-29 18:20By: Tim Cooper and 1 more...

Note to readers: This is an update to the MNI Fed preview published on Thursday April 25. Please see Page 26-31 of this document for sell-side analysts' outlooks for the May 1 FOMC decision and future policy.

Analysts generally look for a more hawkish message from the FOMC in May compared with March, in light of strong inflation and economic activity data.

None expect the Statement forward guidance to be changed, though a few see potential for tweaks. Several eye risks of the characterization of inflation to be changed in a hawkish fashion.
Generally, Powell is expected to tilt more cautious on the inflation outlook than in previous appearances, with potential flashpoints for markets including whether he acknowledges that 3 cuts are less likely to be the base case for the FOMC in 2024, and/or whether June is too early for the first cut.
On tapering QT, consensus is clearly for an announcement at this meeting, with Treasury runoff capped at $30B (vs $60B currently) starting in June. Some see caps set slightly lower ($22.5-25B).
Only one analyst (Danske) whose preview we read still sees a cut as early as June. Consensus for the first cut is clustered around Jul/Sep, though at least one (SocGen) sees the first only in 2025.
A plurality of analysts see 50bp of cuts in 2024, with 100bp in 2025, though the range is somewhere from 75bp to 250bp cumulatively to end-2025 (incorporating analysts who provided forecasts for both years).